Bradley M. Cohen and Kathy A. Cohen - Page 18




                                       - 18 -                                         
          failure to retain their files does not excuse them from their tax           
          obligations because it is their responsibility to retain those              
          records.  Respondent's determination with respect to the addition           
          to tax under section 6651(a)(1) is sustained.                               
               Under section 6662(a), a taxpayer may be liable for a                  
          penalty of 20 percent on the portion of an underpayment of tax              
          attributable to a substantial understatement of tax or due to               
          negligence or disregard of rules or regulations.  Sec. 6662(b).             
          Whether the penalty is applied because of a substantial                     
          understatement of tax or negligence or disregard of the rules or            
          regulations, the accuracy-related penalty is not imposed with               
          respect to any portion of the understatements as to which the               
          taxpayer acted with reasonable cause and in good faith.  Sec.               
          6664(c)(1); Higbee v. Commissioner, supra at 448-449.  The                  
          decision as to whether the taxpayer acted with reasonable cause             
          and good faith depends upon all the pertinent facts and                     
          circumstances.  Sec. 1.6664-4(b)(1), Income Tax Regs.  Relevant             
          factors include the taxpayer’s efforts to assess his proper tax             
          liability, including the taxpayer’s reasonable and good faith               
          reliance on the advice of a tax professional.  See id.                      
               The term "understatement" is defined as the excess of the              
          amount of tax required to be shown on the return for the taxable            
          year over the amount of tax shown on the return for the taxable             
          year.  Sec. 6662(d)(2)(A).  Based on petitioners’ concessions of            






Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  Next

Last modified: May 25, 2011