James Triplett - Page 11




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          4. Negligence Penalty                                                       
               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(c) defines “negligence” to include any failure to              
          make a reasonable attempt to comply with the Internal Revenue               
          Code or to exercise ordinary and reasonable care in the                     
          preparation of a tax return.  “Negligence” also includes any                
          failure by the taxpayer to keep adequate books and records or to            
          substantiate items properly.  Sec. 1.6662-3(b)(1), Income Tax               
          Regs.  Section 6662(c) also 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 is shown that there was                    
          reasonable cause for such portion and the taxpayer acted in good            
          faith with respect thereto.  Sec. 6664(c)(1).                               
               Contrary to section 162(f), which specifically provides that           
          fines are not deductible, petitioner claimed a deduction for the            
          $10,000 fine he paid to the United States in connection with his            
          criminal tax prosecution.  Other deductions claimed on the                  
          Schedule C could not be substantiated, some of which appear to              
          relate to personal expenses.  We see no factual basis and there             
          is certainly no legal basis for the substantial “carry forward              
          loss” credit claimed on petitioner’s 1993 return.  Petitioner’s             






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