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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
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