- 11 - 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’sPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011