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Petitioners have failed to sustain their burden of proof as
to the claimed net operating loss deduction.
IV. Section 6662 Penalty
Respondent determined that petitioners are liable for the
accuracy-related penalty under section 6662. Section 6662(a)
imposes a 20-percent penalty on any portion of an underpayment
that is attributable to negligence. Negligence is the lack of
due care or failure to do what a reasonable and ordinarily
prudent person would do under the same circumstances. See Neely
v. Commissioner, 85 T.C. 934 (1985). A taxpayer’s failure to
keep adequate books and records may constitute negligence. See
Crocker v. Commissioner, 92 T.C. 899, 917 (1989); sec. 1.6662-
3(b), Income Tax. Regs.
No penalty shall be imposed under section 6662(a) with
respect to any portion of an underpayment if it is shown that
there was reasonable cause and that the taxpayer acted in good
faith. See sec. 6664(c). Whether a taxpayer acted with good
faith depends upon the facts and circumstances of each case. See
sec. 1.6664-4(b)(1), Income Tax Regs. The burden of proof is
upon the taxpayer. See Rule 142(a); Bixby v. Commissioner, 58
T.C. 757, 791-792 (1972).
Petitioners argue that the negligence penalty should not
apply because they relied upon the services of their accountant.
Reliance on the advice of an accountant or other professional tax
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