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bona fide debt within the meaning of section 1667 and that
petitioner is not entitled to a bad debt deduction under section
166.
Accuracy-Related Penalty
Section 6662 authorizes the imposition of an accuracy-
related penalty equal to 20 percent of the portion of an
underpayment attributable to, among other things, negligence or
disregard of rules or regulations. See sec. 6662(a) and (b).
“Negligence” includes any failure to make a reasonable attempt to
comply with the provisions of the internal revenue laws, to
exercise ordinary and reasonable care in the preparation of a tax
return, to keep adequate books and records, or to substantiate
items properly. Sec. 6662(c); Allen v. Commissioner, 925 F.2d
348, 353 (9th Cir. 1991), affg. 92 T.C. 1 (1989); Bunney v.
Commissioner, 114 T.C. ___ (2000); sec. 1.6662-3(b)(1), Income
Tax Regs. The term “disregard” includes any careless, reckless,
or intentional disregard. Sec. 6662(c); sec. 1.6662-3(b)(2),
Income Tax Regs.
If a taxpayer shows there was reasonable cause for any
portion of an underpayment and the taxpayer acted in good faith
with respect to that portion, the penalty does not apply. See
sec. 6664(c)(1); sec. 1.6664-4(a), Income Tax Regs. The
7Our holding eliminates the need to discuss whether the
advance was a business debt and, if so, whether it was worthless.
See sec. 166(a), (d).
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