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to deduct unpaid expenses if the party to whom the expenses were
paid is in constructive receipt. We find this argument meritless
and hold petitioner may not deduct the unpaid wages.2 We sustain
respondent's determination.
Respondent determined petitioner is liable for the
accuracy-related penalty under section 6662(a) and (b)(1) for
both years in issue. That section imposes a penalty equal to 20
percent of the portion of an underpayment that is attributable
to, among other things, negligence. Petitioner will avoid this
penalty if the record shows that it was not negligent; i.e., it
made a reasonable attempt to comply with the provisions of the
Internal Revenue Code and was not careless, reckless, or in
intentional disregard of rules or regulations. See sec. 6662(c);
Accardo v. Commissioner, 942 F.2d 444, 452 (7th Cir. 1991), affg.
94 T.C. 96 (1990); Drum v. Commissioner, T.C. Memo. 1994-433,
affd. without published opinion 61 F.3d 910 (9th Cir. 1995).
Negligence connotes a lack of due care or a failure to do what a
reasonable and prudent person would do under the circumstances.
See Allen v. Commissioner, 92 T.C. 1 (1989), affd. 925 F.2d 348
(9th Cir. 1991); Neely v. Commissioner, 85 T.C. 934, 947 (1985).
2Petitioner's argument is rendered particularly meritless by
the fact that the Foriers apparently did not believe they were in
"constructive receipt" of the wages when accrued by petitioner
since they did not include the wages in income until actually
paid.
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