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see section 6662(b)(1). The accuracy-related penalty under
section 6662(a) does not apply to any portion of an underpayment
if it is shown that there was reasonable cause for, and that the
taxpayer acted in good faith with respect to, such portion. See
sec. 6664(c)(1).
An understatement is equal to the excess of the amount of
tax required to be shown in the tax return over the amount of tax
shown in the tax return, see sec. 6662(d)(2)(A), and is substan-
tial in the case of an individual if it exceeds the greater of 10
percent of the tax required to be shown or $5,000, see sec.
6662(d)(1)(A). However, the amount of such understatement is to
be reduced by that portion of the understatement which is attrib-
utable to any item where (1) “the relevant facts affecting the
item’s tax treatment are adequately disclosed in the return or in
a statement attached to the return,” sec. 6662(d)(2)(B)(ii)(I)
(adequate disclosure), and (2) “there is a reasonable basis for
the tax treatment of such item by the taxpayer”, sec.
6662(d)(2)(B)(ii)(II) (reasonable basis).
For purposes of section 6662(a), the term “negligence”
includes any failure to make a reasonable attempt to comply with
the Code, and the term “disregard” includes any careless, reck-
less, or intentional disregard. See sec. 6662(c). Negligence
has also been defined as a lack of due care or failure to do what
a reasonable person would do under the circumstances. See
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