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V. For 1991, is Petitioner Liable for the Negligence Penalty
With Respect to Omitted Interest Income, a Claimed Loss From the
Sale of a Taxi, or Unsubstantiated Business Deductions?
On his delinquently filed 1991 return, petitioner claimed a
$1,490 loss from the sale or involuntary conversion of a taxi.
In the notice of deficiency, respondent determined an $84
accuracy-related negligence penalty under section 6662
attributable to those two items for 1991. Respondent also
determined, as an alternative to the fraud penalty for 1991, that
petitioner was liable for an accuracy-related negligence penalty
under section 6662(b)(1) or (c). Because we have decided that
petitioner is not liable for the fraud penalty for 1991, we
consider whether petitioner is liable for the negligence penalty
with respect to unsubstantiated Schedule C business deductions
for 1991.
Section 6662 provides that if any portion of any
underpayment is due to negligence, then a taxpayer will be liable
for a penalty equal to 20 percent of the underpayment of tax
required to be shown on the return that is attributable to the
taxpayer’s negligence. See sec. 6662(a) and (b)(1). Negligence
is defined as the “lack of due care or failure to do what a
reasonable and ordinarily prudent person would do under the
circumstances.” Korshin v. Commissioner, 91 F.3d 670, 672 (4th
Cir. 1996). As pertinent here, “negligence” includes the failure
to make a reasonable attempt to comply with the provisions of the
Internal Revenue Code and also includes any failure to keep
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