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We must determine whether petitioners acted with reasonable
cause and in good faith within the meaning of section 6664(c)(1)
and the regulations thereunder when they reported in Schedule C
of their 1999 joint return only $1,892, and not $21,891.95, as
the nonemployee compensation that Mr. Larson received from
Windermere during 1999. Petitioners contend that they did. In
support of that contention, petitioners point out that, because
of the alignment error in Form 1099 that Windermere issued to Mr.
Larson for the year at issue, it was not readily apparent from
reviewing that form that the amount of nonemployee compensation
reported therein was $21,891.95, and petitioners assumed that the
amount of such compensation reported in that form was $1,891.95.
On the instant record, we reject petitioners’ argument that under
section 6664(c)(1) and the regulations thereunder the Court
should not hold them liable for the accuracy-related penalty
under section 6662(a).
It is significant that, by reporting only $1,892, instead of
$21,891.95, as the amount of nonemployee compensation that Mr.
Larson received from Windermere during 1999, petitioners failed
to report approximately (1) 91 percent of the total nonemployee
compensation that Mr. Larson received from Windermere during that
year and (2) 82 percent of the total nonemployee compensation
that he received from Windermere and from Data Search during that
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