Miguel Espinoza and Mariaclariza Montoya - Page 11




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          failure to make a reasonable attempt to comply with the                     
          provisions of the internal revenue laws, to exercise ordinary and           
          reasonable care in the preparation of a tax return, and to keep             
          adequate books and records or to substantiate items properly.               
          See sec. 1.6662-3(b)(1), Income Tax Regs.  The term "disregard"             
          includes any careless, reckless, or intentional disregard of                
          rules or regulations.  See sec. 6662(c).                                    
               The burden is on the taxpayer to prove the Commissioner's              
          imposition of the penalty is in error.  See Betson v.                       
          Commissioner, 802 F.2d 365, 372 (9th Cir. 1986), affg. in part              
          and revg. in part T.C. Memo. 1984-264; LaVerne v. Commissioner,             
          94 T.C. 637, 652 (1990), affd. without published opinion 956 F.2d           
          274 (9th Cir. 1992); Luman v. Commissioner, 79 T.C. 846, 860-861            
          (1982); Bixby v. Commissioner, 58 T.C. 757, 791 (1972).  Except             
          for petitioner's testimony that he thought the insurance proceeds           
          were not taxable because they were compensation for the casualty            
          loss, petitioners did not address this issue at trial.                      
               Section 6664(c)(1) provides that the penalty under section             
          6662(a) shall not apply to any portion of an underpayment if it             
          is shown that there was a reasonable cause for the taxpayer's               
          position with respect to that portion and that the taxpayer acted           
          in good faith with respect to that portion.  See sec. 6664(c)(1).           
               The determination of whether a taxpayer acted with                     
          reasonable cause and good faith within the meaning of section               





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