Dak, Inc. - Page 20

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          reasonable attempt to comply with the provisions of the Internal            
          Revenue Code, including any failure to keep adequate books and              
          records or to substantiate items properly.  Sec. 6662(c); sec.              
          1.6662-3(b)(1), Income Tax Regs.  Section 6664(c)(1) provides               
          that the penalty under section 6662(a) shall not apply to any               
          portion of an underpayment if it is shown that there was                    
          reasonable cause for the taxpayer’s position and that the                   
          taxpayer acted in good faith with respect to that portion.  The             
          determination of whether a taxpayer acted with reasonable cause             
          and in good faith is made on a case by case basis, taking into              
          account all the pertinent facts and circumstances.  Sec. 1.6664-            
          4(b)(1), Income Tax Regs.  The most important factor is the                 
          extent of the taxpayer’s effort to assess his proper tax                    
          liability for the year.  Id.; Neely v. Commissioner, 85 T.C. 934,           
          947 (1985).  We find that petitioner was negligent and lacked due           
          care in preparing its Federal income tax return for the year                
          ended May 31, 1995.  We are confident that petitioner was aware             
          that its accountant and bookkeeper, Mr. Kelson, on a daily basis,           
          reconciled cash register tapes 1 and 2 to eliminate any “double-            
          ups”.  Respondent is sustained on this issue.                               
               Reviewed and adopted as the report of the Small Tax Case               

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