- 7 - Thus, petitioner’s admitted understatement of $17,939 greatly exceeded both 10 percent of the proper tax due4 and $5,000. The understatement thus constitutes a “substantial understatement”.5 Petitioner’s tax return for 1992 showed tax due of $596. Respondent’s accuracy-related penalty for 1992 was attributable solely to the negligence provision of section 6662(b)(1).6 Petitioner has introduced no evidence to dispute respondent’s determination that petitioner’s 1991 understatement was “substantial” within the meaning of the statute, or that petitioner was negligent in connection with his 1992 understatement. However, petitioner argues that no accuracy- related penalty should be imposed under section 6664(c)(1), which provides: No penalty shall be imposed under this part with respect to 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. 4The proper tax due consists of the $17,939 understatement plus the $468 in tax shown on 1991 return, for a total of $18,407. The understatement represents more than 97 percent of the proper tax due. 5Respondent did not assert in the notice of deficiency that the 1991 penalty was also being imposed on the alternative grounds of negligence. 6Petitioner’s admitted understatement of $1,395 for 1992 represents more than 10 percent of the proper tax due. The proper tax due consists of the $1,395 understatement plus the tax shown on the return of $596, resulting in a proper tax due of $1,991. The understatement thus represents more than 70 percent of the proper tax due, but does not exceed $5,000.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011