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that petitioner paid any amounts on this note, nor is there any
evidence that Mr. Burns paid any amount to petitioner for
relinquishment of the option. The Court concludes that
petitioner did not engage in a sale or exchange during 1996, nor
did petitioner engage in any other transaction with Mr. Burns
during 1996 that resulted in the realization of either gain or
loss. Respondent, therefore, is sustained on this issue.
Respondent determined that petitioner is liable for the
penalty under section 6662(a) for negligence or disregard of
rules or regulations under section 6662(b)(1).
Section 6662(a) provides that, if it is applicable to any
portion of an underpayment in taxes, there shall be added to the
tax an amount equal to 20 percent of the portion of the
underpayment to which section 6662 applies. Under section
6664(c), no penalty shall be imposed under section 6662(a) 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.
Section 6662(b)(1) provides that section 6662 shall apply to
any underpayment attributable to negligence or disregard of rules
or regulations. Section 6662(c) provides that the term
"negligence" includes any failure to make a reasonable attempt to
comply with the provisions of the Internal Revenue laws, and the
term "disregard" includes any careless, reckless, or intentional
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