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3(b)(1), Income Tax Regs. A return position that has a
“reasonable basis” as defined in the regulation is not
attributable to negligence. Id.
An exception to the section 6662 penalty applies when the
taxpayer demonstrates: (1) There was reasonable cause for the
underpayment, and (2) the taxpayer acted in good faith with
respect to the underpayment. Sec. 6664(c).9 Whether the
taxpayer acted with reasonable cause and in good faith is
determined by the relevant facts and circumstances on a case-by-
case basis. See Stubblefield v. Commissioner, T.C. Memo. 1996-
537; sec. 1.6664-4(b)(1), Income Tax Regs. “Circumstances that
may indicate reasonable cause and good faith include an honest
misunderstanding of fact or law that is reasonable in light of
all the facts and circumstances, including the experience,
knowledge and education of the taxpayer.” Sec. 1.6664-4(b)(1),
Income Tax Regs. A taxpayer is not subject to the addition to
tax for negligence where the taxpayer makes honest mistakes in
complex matters, but the taxpayer must take reasonable steps to
determine the law and to comply with it. Niedringhaus v.
Commissioner, 99 T.C. 202, 222 (1992). The most important factor
is the extent of the taxpayer’s effort to assess the proper tax
9 This section may provide relief even if a return
position does not satisfy the reasonable basis standard. Sec.
1.6662-3(b)(3), Income Tax Regs.
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