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4. Accuracy-Related Penalty
Respondent determined that petitioner is liable for
accuracy-related penalties under section 6662(a) for 1996 and
1997. The accuracy-related penalty is equal to 20 percent of any
portion of an underpayment of tax required to be shown on the
return that is attributable to the taxpayer’s negligence or
disregard of rules or regulations. Sec. 6662(a) and (b)(1).
“Negligence” consists of any failure to make a reasonable attempt
to comply with the provisions of the Internal Revenue Code. Sec.
6662(c). “Disregard” consists of any careless, reckless, or
intentional disregard. Id.
An exception applies to the accuracy-related penalty when
the taxpayer demonstrates (1) there was reasonable cause for the
underpayment, and (2) the taxpayer acted in good faith with
respect to such underpayment. Sec. 6664(c). Whether the
taxpayer acted with reasonable cause and in good faith is
determined by the relevant facts and circumstances. The most
important factor is the extent of the taxpayer’s effort to assess
the proper tax liability. Stubblefield v. Commissioner, T.C.
Memo. 1996-537; sec. 1.6664-4(b)(1), Income Tax Regs. Section
1.6664-4(b)(1), Income Tax Regs., specifically provides:
“Circumstances that may indicate reasonable cause and good faith
include an honest misunderstanding of fact or law that is
reasonable in light of all of the facts and circumstances,
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Last modified: May 25, 2011