Wing Yiu Kwan - Page 15




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          underpayment if it is shown that there was a reasonable cause for           
          such portion and that the taxpayer acted in good faith with                 
          respect to such portion.  The determination of whether a taxpayer           
          acted with reasonable cause and in good faith depends upon the              
          facts and circumstances of each particular case.  Sec. 1.6664-              
          4(b)(1), Income Tax Regs.  Relevant factors include the                     
          taxpayer's efforts to assess his or her proper tax liability, the           
          knowledge and experience of the taxpayer, and reliance on the               
          advice of a professional, such as an accountant.  Drummond v.               
          Commissioner, T.C. Memo. 1997-71.  The most important factor is             
          the extent of the taxpayer's effort to determine the taxpayer's             
          proper tax liability.  Sec. 1.6664-4(b)(1), Income Tax Regs.  An            
          honest misunderstanding of fact or law that is reasonable in                
          light of the experience, knowledge, and education of the taxpayer           
          may indicate reasonable cause and good faith.  Remy v.                      
          Commissioner, T.C. Memo. 1997-72.                                           
               In the notice of deficiency, respondent applied the section            
          6662(a) penalty to all adjustments with the exception of the                
          adjustments to petitioner's dependency exemptions and Schedule C            
          gross receipts.  The underpayment upon which the penalty was                
          computed resulted from respondent's partial disallowance of                 
          petitioner's claimed Schedule C car and truck expenses,                     
          depreciation/section 179 expense deduction, rent or lease                   
          expenses, and utilities expenses, along with respondent's total             








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