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fraud penalty pursuant to section 6663(a) or an addition to tax
for fraudulent failure to file pursuant to section 6651(f).
Accuracy-Related Penalty
In the alternative, respondent determined that petitioners
were liable for the accuracy-related penalty for negligence
pursuant to section 6662(a) for their failure to report the 1994
embezzled income. Respondent also determined that petitioners
were liable for the accuracy-related penalty for negligence
pursuant to section 6662(a) for their claim of certain itemized
deductions on their 1994 return.
Section 6662(a) provides for a penalty equal to 20 percent
of the portion of the underpayment which is attributable to
negligence. See sec. 6662(b)(1). Negligence is the lack of due
care or failure to do what a reasonable and ordinarily prudent
person would do under the circumstances. See Neely v.
Commissioner, 85 T.C. 934, 947 (1985).
Generally, taxpayers are charged with knowledge of the law.
See Niedringhaus v. Commissioner, supra at 222. While ignorance
of the law is a defense to fraud, it does not always negate
negligence. See id. To avoid a negligence penalty, taxpayers
must take reasonable steps to determine the law and apply it.
See id.
Petitioners bear the burden of proving that respondent's
determination as to the negligence penalty is erroneous. See
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