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Accuracy-Related Penalties
Under section 6662, accuracy-related penalties of 20 percent
are imposed on underpayments of tax attributable to negligence or
to a disregard of Federal rules or regulations. Sec. 6662(a) and
(b)(1).
For purposes of section 6662, the term “negligence”
constitutes a failure to make a reasonable attempt to comply with
the Internal Revenue Code, and the term “disregard” includes
carelessness, recklessness, and intentional disregard. Sec.
6662(c). “Negligence” also includes a failure by a taxpayer to
keep adequate books and records or to properly substantiate
items. Sec. 1.6662-3(b)(1), Income Tax Regs.
Petitioners did not make a good faith attempt to ascertain
which loans were worthless at yearend.
Also, ABC’s failure to maintain records to substantiate its
inventory write-downs constitutes negligence under section
6662(a). See secs. 1.471-2(e) and (f)(1), 1.6662-3(b)(1), Income
Tax Regs. We sustain respondent’s determination of the section
6662 penalties.
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Last modified: May 25, 2011