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Section 6662(a)--Accuracy-Related Penalty
Finally, we consider whether petitioners are liable for an
accuracy-related penalty under section 6662(a). Respondent
determined that a 20-percent accuracy-related penalty, based on
negligence, applied to the entire income tax deficiency for the
1991, 1992, and 1993 tax years.
An accuracy-related penalty is imposed by section 6662(a) in
an amount equal to 20 percent of the amount of the underpayment
that is attributable to negligence. See sec. 6662(b)(1).
“Negligence” is the failure to make a reasonable attempt to
comply with the provisions of the Internal Revenue Code. Sec.
6662(c).
A taxpayer is negligent where he fails to exercise due care
or fails to do what a reasonable and ordinarily prudent person
would do under similar circumstances. See Neely v. Commissioner,
85 T.C. 934, 947-948 (1985).
Petitioners contend that they were not negligent and should
not be subject to the accuracy-related penalty because they
provided sufficient records containing FAP’s major tranactions to
their return preparer, leaving out only the minor sales.
Respondent contends that petitioners were negligent when they
failed to record and report all of FAP’s sales transactions.
Petitioner did not maintain adequate books and records for
FAP. Petitioner testified that sales, from $1 to $10, were
regularly omitted from recordkeeping and that FAP employees may
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