Frank and Virginia Muhich - Page 25

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          Section 6662(a)                                                             
          The Muhichs                                                                 
               Respondent determined the Muhichs are liable for the                   
          accuracy-related penalty under section 6662(a) and (b)(1) for               
          both years in issue.  This section imposes a penalty equal to 20            
          percent of the portion of an underpayment that is attributable              
          to, among other things, negligence.  Petitioners will avoid this            
          penalty if the record shows that they were not negligent; i.e.,             
          they made a reasonable attempt to comply with the provisions of             
          the Internal Revenue Code, and they were not careless, reckless,            
          or in intentional disregard of rules or regulations.  See sec.              
          6662(c); Accardo v. Commissioner, 942 F.2d 444, 452 (7th Cir.               
          1991), affg. 94 T.C. 96 (1990); Drum v. Commissioner, T.C. Memo.            
          1994-433, affd. without published opinion 61 F.3d 910 (9th Cir.             
          1995).  Negligence connotes a lack of due care or a failure to do           
          what a reasonable and prudent person would do under the                     
          circumstances.  See Allen v. Commissioner, 92 T.C. 1 (1989),                
          affd. 925 F.2d 348 (9th Cir. 1991); Neely v. Commissioner, 85               
          T.C. 934, 947 (1985).  The accuracy-related penalty of section              
          6662 is not applicable to any portion of an underpayment to the             
          extent that an individual has reasonable cause for that portion             
          and acts in good faith with respect thereto.  See sec.                      
          6664(c)(1).  Such a determination is made by taking into account            
          all facts and circumstances, including the experience and                   
          knowledge of the taxpayer and his or her reliance on a                      

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