Glenn H. and Diane J. Flood - Page 20




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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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