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Issue 2. Accuracy-Related Penalty
Section 6662(a) and (b)(1) imposes an accuracy-related
penalty in the amount of 20 percent of any underpayment that is
attributable to negligence or disregard of rules or regulations.
“Negligence” is defined in section 6662(c) as “any failure to
make a reasonable attempt to comply with the provisions of this
title”, and “disregard” as “any careless, reckless, or
intentional disregard.” Case law similarly states that
“Negligence is a lack of due care or the failure to do what a
reasonable and ordinarily prudent person would do under the
circumstances.” Freytag v. Commissioner, 89 T.C. 849, 887 (1987)
(quoting Marcello v. Commissioner, 380 F.2d 499, 506 (5th Cir.
1967), affg. on this issue 43 T.C. 168 (1964) and T.C. Memo.
1964-299), affd. 904 F.2d 1011 (5th Cir. 1990), affd. 501 U.S.
868 (1991).
An exception to the section 6662(a) penalty is set forth in
section 6664(c)(1) and provides: “No penalty shall be imposed
under this part with respect to any portion of an underpayment if
it is shown that there was a reasonable cause for such portion
and that the taxpayer acted in good faith with respect to such
portion.” The taxpayer bears the burden of establishing that
this reasonable cause exception is applicable, as the
Commissioner’s determination of an accuracy-related penalty is
presumed correct. See Rule 142(a).
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