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parents, it is impossible to reconstruct, with any reliability,
the cost of utilities used by petitioner’s business in 1994.
We sustain respondent’s determination as to utilities.
Accuracy-Related Penalties
Respondent has proposed accuracy-related penalties against
petitioner for each of the years in issue.
Section 6662(a) authorizes respondent to impose a penalty in
an amount equal to 20 percent of the underpayment attributable to
negligence or disregard of rules or regulations. Negligence is
defined as “any failure to make a reasonable attempt to comply
with the provisions of * * * [the Internal Revenue Code]”. Sec.
6662(c); see also Neely v. Commissioner, 85 T.C. 934, 947 (1985)
(negligence is lack of due care or failure to do what a
reasonable and prudent person would do under the circumstances).
Negligence also includes any failure by the taxpayer to keep
adequate books and records or to substantiate items properly.
See sec. 1.6662-3(b)(1), Income Tax Regs. The term “disregard”
includes any careless, reckless, or intentional disregard. Sec.
6662(c). Disregard of rules or regulations is careless if the
taxpayer does not exercise reasonable diligence to determine the
correctness of a return position that is contrary to the rule or
regulation. See sec. 1.6662-3(b)(2), Income Tax Regs. A
taxpayer is not liable for the penalty if he shows that he had
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