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contention above, relating to intra-account transfers, since no
documentary evidence was submitted to substantiate that argument,
the Court finds that petitioner is not entitled to an additional
reduction of the determined unreported gross receipts for 1996.
The Court next considers respondent's determination that
petitioner is liable for the accuracy-related penalties under
section 6662(a) for each of the years in question.
Section 6662(a) provides for an accuracy-related penalty
equal to 20 percent of any portion of an underpayment of tax
required to be shown on the return that is attributable to the
taxpayer's negligence or disregard of rules or regulations. Sec.
6662(a) and (b)(1). Negligence consists of any failure to make a
reasonable attempt to comply with the provisions of the Internal
Revenue Code and disregard consists of any careless, reckless, or
intentional disregard. Sec. 6662(c). The courts have refined
the Code definition of negligence as a lack of due care or
failure to do what a reasonable and prudent person would do under
similar circumstances. An exception 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). Whether the taxpayer acted with
reasonable cause and in good faith is determined by the relevant
facts and circumstances. The most important factor is the extent
of the taxpayer's effort to assess the proper tax liability.
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Last modified: May 25, 2011