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disclosed on the taxpayer’s return or an attached statement, and
there is a reasonable basis for the taxpayer’s treatment of the
item. See sec. 6662(d)(2)(B).
Section 6664(c)(1) provides that the penalty under section
6662(a) shall not apply to any portion of an underpayment if it
is shown that there was reasonable cause for the taxpayer’s
position and that the taxpayer acted in good faith with respect
to that portion. The determination of whether a taxpayer acted
with reasonable cause and in good faith is made on a case-by-case
basis, taking into account all the pertinent facts and
circumstances. See sec. 1.6664-4(b)(1), Income Tax Regs. The
most important factor is the extent of the taxpayer’s effort to
assess his proper tax liability for the year. See id.
Petitioners dispute the assertion of the accuracy-related
penalties, but have not presented any evidence or arguments
specifically addressing this issue. We find that the record in
its entirety supports respondent’s assertion of the penalties in
this case, and we therefore uphold respondent’s determination in
this regard, as modified by respondent’s concessions and our
holding on the other issues in this case.
Reviewed and adopted as the report of the Small Tax Case
Division.
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