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Memo. 1997-562, affd. without published opinion __ F.3d __ (9th
Cir. 1999).14 Respondent's determination on this issue is
sustained.
Accuracy-Related Penalty
Respondent determined that petitioners were liable for
accuracy-related penalties under section 6662(a) for all years in
issue. Section 6662(a) imposes an accuracy-related penalty equal
to 20 percent of any underpayment that is attributable to
negligence or to a substantial understatement of income tax.
Negligence is the lack of due care or failure to do what a
reasonable and ordinarily prudent person would do under the
circumstances. See Neely v. Commissioner, 85 T.C. 934, 947
(1985). It includes the failure to make a reasonable attempt to
comply with the Internal Revenue Code. See sec. 6662(c). No
penalty shall be imposed if it is shown that the taxpayer had
reasonable cause and acted in good faith. See sec. 6664(c).
Petitioners exhibited a lack of due care for each of the
years in issue. With respect to their 1992 tax year, petitioners
failed to report capital gains from the sale of the Danville
14 Petitioners introduced into evidence numerous receipts
for various meals and entertainment expenses at issue, including
receipts for a seafood dinner and bakery items. Many of these
receipts bear cryptic handwritten legends of business purpose and
participants that clearly have been added to the copies, in
identical handwriting and pen font, after the fact. Many more
receipts, such as a great many gas station receipts, bear no
indication of business purpose. Petitioners have offered no
particularized corroborating testimony about any of these claimed
expenses.
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