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one of which is negligence or disregard of rules or regulations.
See sec. 6662(b)(1). “Negligence” includes any failure to make a
reasonable attempt to comply with the provisions of the Internal
Revenue Code and also includes any failure to keep adequate books
and records or to substantiate items properly. Sec. 6662(c);
sec. 1.6662-3(b)(1), Income Tax Regs. Section 6664(c)(1)
provides that the penalty under section 6662(a) shall not apply
to any portion of an underpayment if it is shown that there was
reasonable cause for the taxpayer’s position and that the
taxpayer acted in good faith with respect to that portion. 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 the pertinent facts and circumstances. See sec.
1.6664-4(b)(1), Income Tax Regs. The most important factor is
the extent of the taxpayer’s effort to assess his proper tax
liability for the year. See id. Reasonable cause and good faith
may be indicated by an honest and reasonable misunderstanding of
fact or law. See id.
Petitioner asserts that she includes the amount which she
believes to be alimony, $150 per month, in her taxable income
each year. The record does not support this assertion. In 1997,
petitioner reported $3,022.73 in excess of her wage income. This
amount was far in excess of a $150 monthly payment, which would
equal $1,800. Petitioner did not explain the discrepancy. We
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