- 29 -
Negligence includes a failure to make a reasonable attempt
to comply with the provisions of the internal revenue laws. See
sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. Negligence
has also been defined as a lack of due care or failure to do what
a reasonable person would do under the circumstances. See
Norgaard v. Commissioner, 939 F.2d 874, 880 (9th Cir. 1991),
affg. in part and revg. in part on other grounds T.C. Memo. 1989-
390; Allen v. Commissioner, 925 F.2d 348, 353 (9th Cir. 1991),
affg. 92 T.C. 1 (1989). “Disregard” includes any careless,
reckless, or intentional disregard of rules or regulations. See
sec. 6662(c); sec. 1.6662-3(b)(2), Income Tax Regs.
There is a substantial understatement of income tax if the
amount of the understatement for the taxable year exceeds the
greater of (1) 10 percent of the tax required to be shown on the
return or (2) $5,000. See sec. 6662(d)(1)(A). For purposes of
section 6662(d)(1), “understatement” is defined as the excess of
tax required to be shown on the return over the amount of tax
that is shown on the return reduced by any rebate within the
meaning of section 6211(b)(2). See sec. 6662(d)(2)(A). Any
understatement is reduced by the portion of the understatement
attributable to an item for which there is substantial authority
for the treatment by the taxpayer or where the relevant facts
affecting the item’s tax treatment are adequately disclosed in
Page: Previous 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 NextLast modified: May 25, 2011