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affected. In addition, we find the sentence in petitioners’
opening brief regarding a Rule 155 computation insufficient to
alert respondent of the need to address on the merits the
interplay between section 275(a)(4)(A) and section 1.901-1(d),
Income Tax Regs.
III. Applicability of the Accuracy-Related Penalty
Subsection (a) of section 6662 imposes an accuracy-related
penalty in the amount of 20 percent of any underpayment that is
attributable to causes specified in subsection (b). Subsection
(b) of section 6662 then provides that among the causes
justifying imposition of the penalty are: (1) Negligence or
disregard of rules or regulations and (2) any substantial
understatement of income tax.
“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). Pursuant to regulations, “‘Negligence’ also includes
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