Robert and Clara Satriana - Page 11




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          be construed as an allowance for expenses subject to the strict             
          substantiation rules of section 274(d).                                     
               Petitioners contend they should be absolved of liability for           
          the section 6662(a) penalties because they relied on the                    
          representations of their return preparer.                                   
               Section 6662(a) provides for an accuracy-related penalty               
          equal to 20 percent of any portion of an underpayment of tax                
          required to be shown on the return that is attributable to the              
          taxpayer's negligence or disregard of rules or regulations.  Sec.           
          6662(a) and (b)(1).  Negligence consists of any failure to make a           
          reasonable attempt to comply with the provisions of the Internal            
          Revenue Code and disregard consists of any careless, reckless, or           
          intentional disregard.  Sec. 6662(c).  The courts have refined              
          the Code definition of negligence as a lack of due care or                  
          failure to do what a reasonable and prudent person would do under           
          similar circumstances.  Allen v. Commissioner, 925 F.2d 348, 353            
          (9th Cir. 1991), affg. 92 T.C. 1 (1989).  Section 1.6662-3(b)(1),           
          Income Tax Regs., provides that "Negligence is strongly indicated           
          where * * * a taxpayer fails to make a reasonable attempt to                
          ascertain the correctness of a deduction * * * on a return which            
          would seem to a reasonable and prudent person to be 'too good to            
          be true' under the circumstances".  An exception applies when the           
          taxpayer demonstrates (1) there was reasonable cause for the                
          underpayment, and (2) the taxpayer acted in good faith with                 





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