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Accordingly, we hold that the trust structures of the South
Denali Lands Trust and the Denali Company Trust shall not be
respected for Federal income tax purposes, and the income from
the South Denali Lands Trust and the Denali Company Trust is
taxable to Mr. and Mrs. Norton.
II. Are Mr. and Mrs. Norton Liable for Penalties Under Section
6662(a)?
Respondent determined that Mr. and Mrs. Norton are liable
for accuracy-related penalties under section 6662(a) and (b)(1)
for 1994, 1995, and 1996. Section 6662(a) imposes a penalty in
the amount of 20 percent on the portion of the underpayment to
which the section applies. As relevant to this case, the penalty
applies to any portion of the underpayment that is attributable
to negligence or disregard of the rules or regulations. Sec.
6662(b)(1). Negligence is any failure to make a reasonable
attempt to comply with the provisions of the internal revenue
laws. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax Regs.
Moreover, negligence has been described as the failure to
exercise due care or the failure to do what a reasonable and
prudent person would do under the circumstances. Neely v.
Commissioner, 85 T.C. 934, 947 (1985). Disregard includes any
careless, reckless, or intentional disregard of rules or
regulations. Sec. 6662(c); sec. 1.6662-3(b)(2), Income Tax Regs.
Once the Commissioner has determined an accuracy-related penalty
pursuant to section 6662(b)(1), the taxpayer bears the burden of
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