WSB Liquidating Corporation - Page 18

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          petitioner’s underpayment attributable to the deduction of                  
          compensation was due to negligence or disregard of rules or                 
          regulations.  See sec. 6662(b)(1).  However, the penalty under              
          section 6662(a) shall not be imposed with respect to any portion            
          of an underpayment if there was reasonable cause for such portion           
          and the taxpayer acted in good faith.  See sec. 6664(c)(1).                 
               We find that petitioner’s attempt to deduct personal                   
          expenses of Walter, or dividends paid to Barbara, constitutes               
          negligence or disregard of rules or regulations.  The effort,               
          evidenced in the drafting of the Pension Agreement, to cast the             
          payments as compensation for services reflects an awareness of              
          the applicable tax principles.  However, the fact that the                  
          payments to Barbara satisfied Walter’s alimony obligations is               
          abundantly clear under the Settlement Agreement.  Further,                  
          petitioner has not argued reasonable cause or offered any other             
          argument against the application of the accuracy-related                    
          penalties.  Accordingly, we sustain respondent’s determinations.            
               To reflect the foregoing,                                              

                                             Decision will be entered                 
                                           under Rule 155 with respect to             
                                           the deficiencies, and for                  
                                           respondent with respect to the             
                                           accuracy-related penalties.                

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Last modified: May 25, 2011