- 42 -
533 (1976), affd. 591 F.2d 1273 (9th Cir. 1978); Mitchell v.
Commissioner, 42 T.C. 953, 968 (1964); Starr v. Commissioner, T.C.
Memo. 1995-190, affd. without published opinion 99 F.3d 1146 (9th
Cir. 1996).
Issue 8. Accuracy-Related Penalty
Respondent determined that for both 1993 and 1994,
petitioners underpaid a portion of their income taxes because of
negligence or intentional disregard of rules or regulations.
Section 6662 imposes a penalty equal to 20 percent of the portion
of the underpayment attributable to negligence or disregard of
rules or regulations. Sec. 6662(a) and (b)(1).
Negligence is defined as any failure to make a reasonable
attempt to comply with the provisions of the Internal Revenue
Code, and the term “disregard” includes any careless, reckless, or
intentional disregard. Sec. 6662(c).
The accuracy-related penalty will apply unless petitioners
demonstrate that there was reasonable cause for the underpayment
and that they 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.”
One of petitioners is a supervisory revenue agent with the
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