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of rules or regulations. See sec. 6662(b)(1). Negligence is the
“‘lack of due care or failure to do what a reasonable and
ordinarily prudent person would do under the circumstances.’”
Neely v. Commissioner, 85 T.C. 934, 947 (1985)(quoting Marcello
v. Commissioner, 380 F.2d 499, 506 (5th Cir. 1967), affg. 43 T.C.
168 (1964) and T.C. Memo. 1964-299). Negligence also includes
any failure by the taxpayer to keep adequate books and records or
to substantiate items properly. See sec. 1.6662-3(b)(1), Income
Tax Regs. The term “disregard” includes any careless, reckless,
or intentional disregard. Sec. 6662(c). No penalty shall be
imposed if it is shown that there was reasonable cause for the
underpayment and the taxpayer acted in good faith with respect to
the underpayment. See sec. 6664(c). The determination of
whether a taxpayer acted with reasonable cause and good faith
within the meaning of section 6662(c) 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.
Petitioner failed to show that he had a reasonable basis for
his belief that the gain from the Tryon Road property was not
taxable. He failed to make reasonable inquiries as to whether
the income reported on a Form 1099-S was taxable. See Rosenbaum
v. Commissioner, T.C. Memo. 1992-287, affd. 998 F.2d 1016 (7th
Cir. 1993).
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Last modified: May 25, 2011