James H. Pugh, Jr., and Alexis C. Pugh - Page 5




                                        - 5 -                                         

          and the term 'disregard' includes any careless, reckless, or                
          intentional disregard."                                                     
               The accuracy-related penalty will not be imposed with                  
          respect to any portion of an 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.  Sec.            
          6664(c)(1).  The determination of whether a taxpayer acted with             
          reasonable cause and in good faith depends upon the facts and               
          circumstances.  Sec. 1.6664-4(b)(1), Income Tax Regs.  The most             
          important factor is the extent of the taxpayer's effort to                  
          determine the taxpayer's proper tax liability.  Id.                         
               Respondent determined that petitioners' underpayments of tax           
          were due to negligence or intentional disregard of rules or                 
          regulations.  Respondent since has conceded the portions of the             
          penalties related to the COD issue.  The remaining portions of              
          the penalties relate to the income conceded by petitioners; i.e.,           
          the gain on the sale of stock in Epoch Management, Inc.                     
               Petitioners argue that they were not negligent, but merely             
          mistaken, in their reporting position with respect to the Epoch             
          Management, Inc. stock.  They state in their brief that they                
          concluded they could recover all of their basis before reporting            
          any gain.  They also allege that their failure to include the               
          gain was inadvertent, in view of the amounts of the adjustment              
          resulting from this omission ($60,077 and $5,763 for 1990 and               
          1991, respectively) as compared to the total income reported                
          ($778,781 and $1,215,732, respectively).                                    

Page:  Previous  1  2  3  4  5  6  Next

Last modified: May 25, 2011