Plains Petroleum Company and Subsidiaries - Page 69



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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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