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to that carryover, see sec. 172(a), and we sustain respondent’s
disallowance.
B. Section 6662(a) Penalty
Section 6662(a) provides for an accuracy-related penalty
(the accuracy-related penalty) in the amount of 20 percent of the
portion of any underpayment attributable to, among other things,
negligence or intentional disregard of rules or regulations
(without distinction, negligence), any substantial understatement
of income tax, or any substantial valuation misstatement.
Section 6664(c)(1) provides that the accuracy-related penalty
shall not apply to an underpayment if the taxpayer had reasonable
cause for his or her position and acted in good faith.
Respondent determined the accuracy-related penalty against the
Careys. Although, in his notice of deficiency to the Careys,
respondent states that he bases his imposition of the section
6662(a) accuracy-related penalty upon “1 or more” of the three
grounds listed in section 6662(b)(1) through (3), on brief,
respondent relies only on his claims that the Careys were
negligent or substantially understated their income tax.
On brief, the Careys argue that they should not be subject
to the accuracy-related penalty because they relied on the advice
of professionals. They argue as follows:
The respondent states the Carey’s are liable for
accuracy related penalty. The Carey’s acted in good
faith to comply with all IRS regulation. Income tax
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