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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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