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his Federal income tax return for 1997. Although petitioner did
not receive the refund check, the refund amount was applied to an
outstanding New York State tax liability in 1997. The amount
credited against petitioner’s New York State tax liability is
included as gross income as “constructively received” insofar as
it was credited to petitioner’s account, or set apart for him, or
otherwise made available to him. See sec. 1.451-2(a), Income Tax
Regs. Accordingly, we sustain respondent’s determination that
the refund of $368.55 of State income tax is includable in
petitioner’s gross income for his 1997 tax year.
C. Accuracy-Related Penalty
Respondent determined that petitioner is liable for the
accuracy-related penalty under section 6662(a) for 1997. The
accuracy-related penalty is equal to 20 percent of any portion of
an underpayment of tax required to be shown on the return that is
attributable to the taxpayer’s negligence or disregard of rules
or regulations. See sec. 6662(a) and (b)(1). “Negligence”
consists of any failure to make a reasonable attempt to comply
with the provisions of the Internal Revenue Code. Sec. 6662(c).
“Disregard” consists of any careless, reckless, or intentional
disregard. Id.
An exception applies to the accuracy-related penalty when
the taxpayer demonstrates (1) there was reasonable cause for the
underpayment, and (2) the taxpayer acted in good faith with
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