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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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Last modified: May 25, 2011