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disallowing any deduction for the cost of tools.
3. Accuracy-Related Penalties and Addition to Tax
Respondent also determined accuracy-related penalties under
section 6662(a) for 1992 and 1993. Section 6662(a) imposes a 20-
percent penalty on underpayments attributable to negligence or
disregard of rules or regulations. Sec. 6662(b)(1).
“Negligence” is the failure to make a reasonable attempt to
comply with the provisions of the Internal Revenue Code, or the
“failure to do what a reasonable and ordinarily prudent person
would do under the circumstances.” Neely v. Commissioner, 85
T.C. 934, 947 (1985). No accuracy-related penalty may be imposed
on any portion of an underpayment if it is shown that there was a
“reasonable cause” for such portion and that the taxpayer acted
in “good faith” with respect to such portion. Sec. 6664(c)(1).
The determination of whether a taxpayer acted in good faith is
made case by case, taking into account all pertinent facts and
circumstances. Sec. 1.6664-4(b), Income Tax Regs. The most
important factor is the extent of the taxpayer’s efforts to
determine the proper tax liability. Id.
On brief, petitioner argues that for 1992 and 1993 he
calculated his business expense deductions the same way he had
done for several prior years, and that he did not receive any
deficiency notices for those years. Petitioner argues that his
reliance on respondent’s failure to take exception to his
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