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Section 6662(a) and (b)(1) imposes an accuracy-related
penalty in the amount of 20 percent of any portion of an
underpayment attributable to negligence or disregard of rules or
regulations. The term “negligence” is defined in section 6662(c)
as “any failure to make a reasonable attempt to comply with the
provisions of this title”. “Negligence connotes a lack of due
care or a failure to do what a reasonable and prudent person
would do under the circumstances.” Bunney v. Commissioner, 114
T.C. 259, 266 (2000); see also Allen v. Commissioner, 925 F.2d
348, 353 (9th Cir. 1991), affg. 92 T.C. 1 (1989); Freytag v.
Commissioner, 89 T.C. 849, 887 (1987), affd. 904 F.2d 1011 (5th
Cir. 1990), affd. 501 U.S. 868 (1991). Negligence also includes
any failure by the taxpayer to keep adequate books and records or
to substantiate items properly. See sec. 1.6662-3(b)(1), Income
Tax Regs. The term “disregard” includes any careless, reckless,
or intentional disregard. Sec. 6662(c); sec. 1.6662-3(b)(2),
Income Tax Regs.
Section 6664(c)(1) provides that the accuracy-related
penalty shall not be imposed with respect to any portion of an
underpayment if it is shown that a taxpayer acted in good faith
and that there was reasonable cause for the underpayment. The
determination of whether a taxpayer acted with reasonable cause
and in good faith is made on a case by case basis, taking into
account all pertinent facts and circumstances. See Compaq
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