Michael and Kazuko Yang - Page 13




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          understatement of income tax.  See sec. 6662(a), (b)(1), and                
          (b)(2).  “Negligence” has been defined as the failure to do what            
          a reasonable and ordinarily prudent person would do under the               
          circumstances.  Neely v. Commissioner, 85 T.C. 934, 947 (1985).             
          The term “disregard” includes any careless, reckless, or                    
          intentional disregard of rules or regulations.  Sec. 6662(c).  An           
          understatement is “substantial” if it exceeds the greater of                
          $5,000 or 10 percent of the tax required to be shown on the                 
          return.  Sec. 6662(d)(1) and (d)(2).  Respondent’s determination            
          that petitioners were negligent is presumptively correct, and the           
          burden is on petitioners to show a lack of negligence.  See Hall            
          v. Commissioner, 729 F.2d 632, 635 (9th Cir. 1984), affg. T.C.              
          Memo. 1982-337.  The accuracy-related penalty applies 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).                                        
               Petitioners have not established that their underpayments              
          for 1995 and 1996 were due to reasonable cause or a lack of                 
          negligence.  Accordingly, we hold that petitioners are liable for           
          the accuracy-related penalty for 1995 and 1996.                             

                                                  Decision will be entered            
                                             under Rule 155.                          









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