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one-half of the taxable year; (2) the individual is between the
ages of 25 and 65 before the close of the taxable year; and (3)
the individual is not an allowable dependent claimed by another
taxpayer in the same calendar year. Petitioner has met all of
the above requirements. However, petitioner is subject to the
limitations of the earned income credit under section 32(a)(2).
Because petitioner’s income was greater than $9,230 in 1995,
$9,500 in 1996, and $9,770 in 1997, petitioner is not allowed to
claim the credits. See sec. 32(a)(2).
Accuracy-Related Penalty
The last issue for decision is whether petitioner is liable
for accuracy-related penalties pursuant to section 6662(a).
Section 6662(a) imposes a penalty of 20 percent of the portion of
the underpayment that is attributable to negligence or disregard
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
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Last modified: May 25, 2011