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The accuracy-related penalty will apply unless petitioner
demonstrates that there was reasonable cause for the under-
payment and that he acted in good faith with respect to the
underpayment. See sec. 6664(c). Section 1.6664-4(b)(1), Income
Tax Regs. specifically provides: "Circumstances that may
indicate reasonable cause and good faith include an honest
misunderstanding of fact or law that is reasonable in light of
the experience, knowledge and education of the taxpayer."
Whether a taxpayer acted with reasonable cause and good faith
depends on the pertinent facts and circumstances. See McCallson
v. Commissioner, T.C. Memo. 1993-528; sec. 1.6664-4(b)(1), Income
Tax Regs. Petitioner must show that he was not negligent. See
Cluck v. Commissioner, 105 T.C. 324, 339 (1995).
Petitioner explained at trial that he claimed on his return
attorney's fees and other litigation costs associated with his
divorce action as miscellaneous deductions based on his "literal
reading" of section 212, governing expenses for the production of
income. He testified that he was in error when he made "an
inadvertent computation" and deducted 1993 State taxes on his
1994 Federal tax return.
The record here shows that petitioner is a highly educated
individual who has demonstrated some income tax knowledge. We
find it unreasonable that petitioner, an attorney, would
interpret "literally" a provision allowing the deduction of
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