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II. Penalties
The remaining issue we must decide is whether petitioners
are liable for accuracy-related penalties pursuant to section
6662(a). Respondent determined that petitioners are liable for
section 6662(a) accuracy-related penalties for 1991, 1992, and
1993. The penalties were determined with respect to the section
269 issue (i.e., the disallowed NOL deductions), as well as the
adjustments conceded by petitioners in the petition. Because we
held supra that section 269 does not operate to disallow
petitioners' use of Tri-Power's NOL's, the only issue remaining
to be decided is whether petitioners are liable for section
6662(a) accuracy-related penalties with respect to the
adjustments conceded in the petition.
Section 6662(a) imposes a penalty equal to 20 percent of the
portion of the underpayment of tax attributable to one or more of
the items set forth in subsection (b). Respondent contends that
the section 6662(a) penalty for 1992 was due to negligence or
disregard of rules or regulations and that the section 6662(a)
penalties for 1991, 1992, and 1993 were based on substantial
understatements of income tax. See sec. 6662(b)(1) and (2).
The accuracy-related penalty does not apply with respect to
any portion of the underpayment if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted in
good faith with respect to such portion. See sec. 6664(c)(1).
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