David E. and Rebecca Newman - Page 11

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                  We now must decide whether petitioners are liable for the                            
            accuracy-related penalty under section 6662(a).  Respondent, for                           
            both of the taxable years, determined an accuracy-related                                  
            penalty, based on negligence, under section 6662(a).  That                                 
            section imposes an addition to tax in the amount of 20 percent of                          
            any portion of the underpayment attributable to negligence or the                          
            disregard of rules or regulations.  See sec. 6662(a) and (b)(1).                           
            Petitioners must show that respondent’s determination is                                   
            erroneous.  See Rule 142(a).                                                               
                  The term “negligence” includes any failure to make a                                 
            reasonable attempt to comply with the provisions of the tax laws,                          
            and the term “disregard” includes any careless, reckless, or                               
            intentional disregard.  Sec. 6662(c).  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 Allen v.                                     
            Commissioner, 925 F.2d 348, 353 (9th Cir. 1991), affg. 92 T.C. 1                           
            (1989); Neely v. Commissioner, 85 T.C. 934, 947-948 (1985).  To                            
            avoid this penalty, petitioners must show that their actions were                          
            reasonable and not careless, reckless, or made with intentional                            
            disregard of rules or regulations.  See Delaney v. Commissioner,                           
            743 F.2d 670 (9th Cir. 1984), affg. T.C. Memo. 1982-666.                                   
            Taxpayers are expected to maintain adequate records, and failure                           
            to do so may constitute negligence and a disregard of rules or                             
            regulations.  See sec. 6001.                                                               

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