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failure to make a reasonable attempt to comply with the
provisions of the internal revenue laws, and the term “disregard”
includes any careless, reckless, or intentional disregard of
rules or regulations. Sec. 6662(c). Negligence is the lack of
due care or failure to do what a reasonable and ordinarily
prudent person would do under like circumstances. See, e.g.,
Allen v. Commissioner, 925 F.2d 348, 353 (9th Cir. 1991), affg.
92 T.C. 1 (1989); Neely v. Commissioner, 85 T.C. 934, 947 (1985).
No penalty shall be imposed under section 6662(a) with
respect to any portion of an underpayment if it is shown that
there was a reasonable cause and that the taxpayer acted in good
faith. See sec. 6664(c). The determination of whether a
taxpayer acted with reasonable cause and in good faith depends
upon the facts and circumstances of each particular case. See
sec. 1.6664-4(b)(1), Income Tax Regs. The burden of proof is
upon the taxpayer. See Rule 142(a).
The individual petitioners have not established that their
underpayment was due to reasonable cause or that they acted in
good faith. To the contrary, the record is clear that
petitioners engaged in a scheme to divert substantial sums of
their wage income to Crestmark, which then claimed business
expenses for their personal living expenses, such as home
improvements, country club dues, and meals.
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Last modified: May 25, 2011