Charles R. and Dru L. Haggart - Page 6

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          do not entertain the issue.  See Rule 34(b)(4).  We turn to the             
          issues that are properly before the Court.                                  
          Accuracy-Related Penalties                                                  
               Section 6662(a) provides that “there shall be added to the             
          tax an amount equal to 20 percent of the portion of the                     
          underpayment to which this section applies.”  Section 6662(b)               
          provides in part:                                                           
                    SEC. 6662(b).  Portion of Underpayment to Which                   
               Section Applies.–-This section shall apply to the portion of           
               any underpayment which is attributable to 1 or more of the             
                         (1) Negligence or disregard of rules or                      
                         (2) Any substantial understatement of income                 
               Negligence is defined as the “lack of due care or failure to           
          do what a reasonable and ordinarily prudent person would do under           
          the circumstances.”  Korshin v. Commissioner, 91 F.3d 670, 672              
          (4th Cir. 1996), affg. T.C. Memo. 1995-46.  Negligence “includes            
          any failure to make a reasonable attempt to comply with the                 
          provisions” of the Internal Revenue Code.  Sec. 6662(c).                    
          “‘Negligence’ also includes any failure by the taxpayer to keep             
          adequate books and records or to substantiate items properly.”              
          Sec. 1.6662-3(b)(1), Income Tax Regs.                                       

          4  We need not address whether petitioners’ underpayments were              
          substantial because we hold that petitioners are liable for the             
          accuracy-related penalties due to negligence.                               

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