- 15 -
attempt to comply with the provisions of the Internal Revenue
Code, and the term “disregard” includes any careless, reckless,
or intentional disregard. Under section 6664(c), the accuracy-
related penalty of section 6662 does not apply to the extent
there is reasonable cause for, and the taxpayer acted in good
faith with respect to, the underpayment.
Bearing in mind that we are evaluating the reasonableness of
respondent’s assertion of the penalty,10 rather than the
applicability of the penalty itself, we nonetheless conclude that
respondent’s position on the penalty issue was not reasonable.
As discussed above, the determination of whether a discharge of
indebtedness has occurred for tax purposes is extremely fact
specific. When respondent issued his notice of deficiency (and
again when he filed his answer in the judicial proceeding), he
was aware of the conflicting evidence with respect to the
discharge of indebtedness issue. While we have found that such
conflicting evidence did not render unreasonable respondent’s
decision to continue to pursue that issue, we conclude otherwise
with regard to respondent’s decision to pursue the negligence
penalty. Cf. Mitchell v. Commissioner, T.C. Memo. 2000-145
10 We assume for these purposes that respondent asserted
the penalty on the ground that petitioners were negligent. The
alternative standard (i.e., disregard of rules or regulations)
contemplates a specific statutory or administrative rule that is
contrary to the taxpayer’s reporting position, see sec. 1.6662-
3(b)(2), Income Tax Regs., a circumstance which does not appear
to be present here.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011