- 8 - deduction. Petitioner testified that petitioners had paid the amount deducted. Considering the substantiation of the 1996 deduction and petitioner’s testimony, we believe that it is highly likely that petitioners incurred and paid the amount claimed for 1995. We hold for petitioners on this issue. 3. Negligence Section 6662(a) imposes a penalty with respect “to any portion of an underpayment of tax required to be shown on a return” in an amount “equal to 20 percent of the portion of the underpayment to which this section applies.” Section 6662 applies, inter alia, to underpayments attributable to 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 “disregard” includes any careless, reckless, or intentional disregard. Sec. 6662(c). Also, “‘Negligence is a lack of due care or the failure to do what a reasonable and ordinarily prudent person would do under the circumstances.’” Freytag v. Commissioner, 89 T.C. 849, 887 (1987) (quoting Marcello v. Commissioner, 380 F.2d 499, 506 (5th Cir. 1967), affg. on this issue 43 T.C. 168 (1964) and T.C. Memo. 1964-299), affd. 904 F.2d 1011 (5th Cir. 1990), affd. on other grounds 501 U.S. 868 (1991). The question then is whether petitioners’ conduct meets the reasonably prudent person standard. See id.Page: Previous 1 2 3 4 5 6 7 8 9 10 Next
Last modified: May 25, 2011