- 12 -
Whether Edgar Is Liable for the Accuracy-Related Penalty Under
Section 6662(a)
Respondent determined that a 20-percent penalty was
applicable to Edgar because of negligence, disregard of rules or
regulations, and substantial understatement of income tax. An
understatement is “substantial” if it exceeds the greater of 10
percent of the tax required to be shown on the return or $5,000.
Sec. 6662(d)(1). Edgar’s understatement for 1989 exceeds the
threshold for application of section 6662.
An accuracy-related penalty is imposed on a taxpayer if any
portion of an underpayment of tax is attributable to either
negligence or disregard of rules or regulations or to any
substantial understatement of income tax. See sec. 6662(a) and
(b)(1) and (2). The term “negligence” includes 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 is not to be imposed if it is shown that
there was reasonable cause for the underpayment and that the
taxpayer acted in good faith. See sec. 6664(c)(1). Petitioners
have the burden of showing that they are not liable for the
accuracy-related penalty. See Welch v. Helvering, 290 U.S. 111
(1933).
In support of his determination, respondent contends that
Edgar failed to report the $135,550 he received in connection
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
Last modified: May 25, 2011