Rick and Ruth Baime Richards - Page 26

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          Therefore, petitioners are not entitled to a loss carryforward of           
          6. Accuracy-Related Penalty                                                 
               Mr. Richards prepared petitioners’ tax return for the year             
          at issue.                                                                   
               Section 6662(a) imposes a penalty of 20 percent on any                 
          portion of an underpayment of tax that is attributable to                   
          negligence or disregard of rules or regulations.  See sec.                  
          6662(a) and (b)(1).  “Negligence” is defined as any failure to              
          make a reasonable attempt to comply with the provisions of the              
          Internal Revenue Code, and the term “disregard” includes any                
          careless, reckless, or intentional disregard.  Sec. 6662(c).  A             
          position with respect to an item is attributable to negligence if           
          it lacks a reasonable basis.  See sec. 1.6662-3(b)(1), Income Tax           
          Regs.  Moreover, taxpayers are required to keep adequate books              
          and records sufficient to establish the amount of deductions or             
          other items required to be shown on their returns.  Failure to              
          maintain adequate books and records or to substantiate items                
          properly also constitutes negligence.  See id.                              
               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 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).           

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