- 30 -
III. Accuracy-Related Penalties
Respondent argues that petitioners are liable for the 1993
and 1994 accuracy-related penalties determined under section
6662(a) for, among other things, negligence and intentional
disregard of rules or regulations. Petitioners focus on the
portion of the accuracy-related penalty attributable to Jerry’s
trading of securities and argue that they exercised ordinary care
in the handling of their tax affairs by hiring accountants to
report those affairs correctly.
Section 6662(a) and (b)(1) imposes a 20-percent
accuracy-related penalty on the portion of an underpayment that
is due to negligence or intentional disregard of rules or
regulations. Negligence includes a failure to attempt reasonably
to comply with the Code. Sec. 6662(c). Disregard includes a
careless, reckless, or intentional disregard. Id. An
underpayment is not attributable to negligence or intentional
disregard to the extent that the taxpayer shows that the
underpayment is due to the taxpayer’s having reasonable cause and
acting in good faith. Secs. 1.6662-3(a), 1.6664-4(a), Income Tax
Regs.
Reasonable cause requires that the taxpayer have exercised
ordinary business care and prudence as to the disputed item.
United States v. Boyle, 469 U.S. 241 (1985); see also Neonatology
Associates, P.A. v. Commissioner, 115 T.C. 43, 98 (2000). The
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011