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due to negligence or disregard of rules or regulations. See sec.
6662(b). A substantial understatement of tax is defined as an
understatement of tax that exceeds the greater of 10 percent of
the tax required to be shown on the tax return or $5,000. See
sec. 6662(d)(1)(A). The understatement is reduced to the extent
that the taxpayer has (1) adequately disclosed his or her
position and has a reasonable basis for such position or (2) has
substantial authority for the tax treatment of the item. See
sec. 6662(d)(2)(B). In addition, section 6662(c) defines
“negligence” as any failure to make a reasonable attempt to
comply with the provisions of the Internal Revenue Code, and
“disregard” means any careless, reckless, or intentional
disregard.
Whether applied because of a substantial understatement of
tax or negligence or disregard of the rules or regulations, the
accuracy-related penalty is not imposed with respect to any
portion of the understatement as to which the taxpayer acted with
reasonable cause and in good faith. See sec. 6664(c)(1). The
decision as to whether the taxpayer acted with reasonable cause
and in good faith depends upon all the pertinent facts and
circumstances. See sec. 1.6664-4(b)(1), Income Tax Regs.
Relevant factors include the taxpayer's efforts to assess his
proper tax liability, including the taxpayer’s reasonable and
good faith reliance on the advice of a professional such as an
accountant. See id. Further, an honest misunderstanding of fact
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