- 9 - Consequently, we are unable to conclude that these deposits were made from nontaxable sources. Respondent’s determination that petitioner’s 1995 income was understated by the total of these deposits is therefore sustained. 2. Self-Employment Tax We accept petitioner’s claim that with the exception of Submarine 21, he was not otherwise employed, or self-employed during 1995. To the extent that Submarine 21 was the source of the omitted income as determined above, that income would not constitute net earnings from self-employment, see sec. 1402, and therefore would not be subject to the section 1401 tax imposed on such income. Consequently, we reject respondent’s determination that the omitted income is subject to the section 1401 tax. 3. Negligence Penalty Respondent determined that the understatement of tax required to be shown on petitioner’s 1995 return is due to negligence. Section 6662(a) imposes an accuracy-related penalty of 20 percent on any portion of an underpayment of tax that is attributable to negligence or disregard of rules or regulations. Section 6662(a) defines “negligence” to include any failure to make a reasonable attempt to comply with the Internal Revenue Code, and defines “disregard” to include any careless, reckless, or intentional disregard of rules or regulations. The negligence penalty does not apply to any portion of an underpayment if it isPage: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
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