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Penalty for Negligence or Disregard of Rules or Regulations
Because we find that petitioners are not liable for
the fraud penalty under section 6663(a), we must consider
whether they are liable for the accuracy-related penalty
under section 6662(a) for 1992, 1993, and 1994, which
respondent determined as an alternative to fraud. Section
6662 imposes a penalty equal to 20 percent of any portion
of an underpayment of tax that is attributable to
negligence or disregard of rules or regulations. See sec.
6662(a) and (b). The term “negligence” is defined as “any
failure to make a reasonable attempt to comply with the
provisions of [title 26 of the United States Code]”. Sec.
6662(c). This includes any failure to exercise due care or
to do what a reasonable and ordinarily prudent person would
do under the circumstances. See Rybak v. Commissioner, 91
T.C. 524, 565 (1988); Neely v. Commissioner, 85 T.C. 934,
947 (1985). The term “disregard” includes any careless,
reckless, or intentional disregard. Sec. 6662(c).
Petitioners bear the burden of proving that respondent’s
determination of negligence is erroneous. See Rule 142(a);
Luman v. Commissioner, 79 T.C. 846, 860-861 (1982).
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