Louis A. Filios and Estate of Emma L. Filios, Deceased, Louis A. Filios, Executor - Page 22

                                        - 22 -                                         
          C.   Whether Petitioners Are Liable for the Penalty Under Section            
               6662 for Negligence                                                     
               Respondent determined that petitioners are liable for the               
          accuracy-related penalty for negligence for 1992 and 1993 under              
          section 6662.                                                                
               Taxpayers are liable for a penalty equal to 20 percent of               
          the part of the underpayment to which section 6662 applies.  Sec.            
          6662(a).  Section 6662 applies to an underpayment attributable to            
          negligence.  Sec. 6662(b)(1).  Negligence includes a failure to              
          make a reasonable attempt to comply with internal revenue laws or            
          to exercise ordinary and reasonable care in preparing a tax                  
          return.  Sec. 6662(c).  The accuracy-related penalty does not                
          apply to any part of an underpayment if the taxpayer shows that              
          he or she had reasonable cause and acted in good faith.  Sec.                
               Petitioner employed and relied on a C.P.A. who had                      
          represented petitioner in audits by respondent on the issue of               
          whether petitioner operated the horse activity for profit.                   
          Petitioner's C.P.A. believed that petitioners properly deducted              
          petitioner's horse activity expenses.  Petitioner had conducted              
          his horse racing and breeding activity for more than 30 years                
          when respondent audited petitioners in 1987 and made no changes.             
          We conclude that petitioners are not liable for the accuracy-                
          related penalty for negligence for deducting losses attributable             
          to petitioner's horse racing and breeding activity in 1992 and               

Page:  Previous  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  Next

Last modified: May 25, 2011