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F.2d 985 (10th Cir. 1971), is to follow the holding of a Court of
Appeals where the facts are squarely on point.
There is no question that Alabama law applies to
petitioner’s contingent fee agreement, and respondent has not
distinguished the facts here regarding the fee agreement from
those in Cotnam or Davis. Accordingly, we hold that petitioner
is not required to include in gross income the portion of the
recovery attributable to the legal fees.4
Section 6662
Respondent determined an accuracy-related penalty under
section 6662 on that part of petitioner’s deficiency that was
attributable to negligence or an intentional disregard of rules
or regulations. Section 6662 permits the imposition of a 20-
percent penalty on any portion of an underpayment of tax
attributable to negligence or an intentional disregard of rules
or regulations. The term “negligence” includes any failure to
make a reasonable attempt to comply with the statute, and the
term “disregard” includes careless, reckless, or intentional
disregard. Sec. 6662(c). Negligence also includes a lack of due
care or failure to do what a reasonable and ordinarily prudent
person would do under the circumstances. See Ryback v.
Commissioner, 91 T.C. 524, 565 (1988); Neely v. Commissioner, 85
4 Here, the parties have both stated that the legal fee in
question is in the amount of $2,519,000.
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