Lucian T. Baldwin, III - Page 59




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          an underpayment that, as pertinent here, is due to negligence or            
          intentional disregard of rules or regulations, section                      
          6662(b)(1), a substantial understatement of income tax, section             
          6662(b)(2), or a substantial valuation misstatement, section                
          6662(b)(3).25                                                               
               An underpayment is not attributable to negligence or                   
          intentional disregard, substantial understatement of income tax,            
          or a valuation misstatement under section 6662 to the extent that           
          the taxpayer shows that he had reasonable cause for the                     
          underpayment and that he acted in good faith with respect to such           
          underpayment.  Sec. 6664(c); secs. 1.6662-3(a), 1.6664-4(a),                
          Income Tax Regs.  To prove he had reasonable cause for an                   
          underpayment, a taxpayer must show that he exercised ordinary               
          business care and prudence with respect to the disputed item.               
          United States v. Boyle, 469 U.S. 241 (1985); see also Neonatology           
          Associates, P.A. v. Commissioner, 115 T.C. 43, 98 (2000).  In               
          this case, petitioner bears the burden of proving that he is not            
          liable for the addition to tax under section 6653(a) and the                



               25For purposes of sec. 6662(b)(1), negligence is defined to            
          include “any failure to make a reasonable attempt to comply with            
          the provisions of [the Code]”, and disregard is defined to                  
          include “any careless, reckless, or intentional disregard.”  Sec.           
          6662(c).  For purposes of sec. 6662(b)(2), there is a substantial           
          understatement of income tax for any taxable year if the amount             
          of the understatement exceeds the greater of 10 percent of the              
          tax required to be shown on that year’s tax return or $5,000.               
          Sec. 6662(d)(1)(A).  For purposes of sec. 6662(b)(3), a valuation           
          misstatement is as defined in sec. 6662(e).                                 





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