- 8 -
apply, and an attribution rule in section 469 is consistent with
that section and its legislative history. Id. at 223-229.
The same result follows here. Because Dr. Connor could, and
did, materially participate in the dental activity of his
personal service corporation, the recharacterization rule of
section 1.469-2(f)(6), Income Tax Regs., operates during the
subject years to characterize petitioners' income from the Lease
as nonpassive. We sustain respondent's determination on this
issue.
Finally, we must decide whether petitioners are liable for
accuracy-related penalties for the years in issue. Section
6662(a) imposes an accuracy-related penalty in the amount of 20
percent of the portion of an underpayment of tax attributable to
negligence or disregard of rules or regulations. Sec. 6662(a)
and (b)(1). Negligence is any failure to make a reasonable
attempt to comply with the provisions of the Internal Revenue
laws. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax Regs.
Moreover, negligence is the failure to exercise due care or the
failure to do what a reasonable and prudent person would do under
the circumstances. Neely v. Commissioner, 85 T.C. 934, 947
(1985). Disregard includes any careless, reckless, or
intentional disregard of rules or regulations. Sec. 6662(c);
sec. 1.6662-3(b)(2), Income Tax Regs.
Under section 6664(c), no penalty will be imposed with
respect to any portion of any underpayment if it is shown that
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