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concluded that those cases are distinguishable, we are satisfied
that they constitute substantial authority for Indeck’s
treatment. Accordingly, to the extent Indeck’s understatement of
tax is attributable to its deduction of $4,856,922 of the
settlement payment, it is reduced pursuant to section
6662(d)(2)(B)(i). See sec. 1.6662-4(d)(3)(ii), Income Tax Regs.
Respondent asserts in the alternative that Indeck is liable
for a section 6662(a) penalty because the underpayment arising
from Indeck’s disallowed interest deduction is attributable to
negligence or disregard of rules or regulations. See sec.
6662(b)(1). In this context, “negligence” includes a failure to
make a reasonable attempt to comply with the provisions of the
internal revenue laws or to exercise ordinary and reasonable care
in the preparation of a tax return, and “disregard” is
characterized as any careless, reckless, or intentional
disregard. Sec. 6662(c); sec. 1.6662-3(b)(1) and (2), Income Tax
Regs. A position with respect to an item is attributable to
negligence if it lacks a reasonable basis. Sec. 1.6662-3(b)(1),
Income Tax Regs. Respondent’s regulations applicable to Indeck’s
return for the taxable year ended in 1994 do not provide a
definition of reasonable basis, but provide that it is a standard
that is significantly higher than the “not frivolous” standard
applicable under section 6694 and defined in section 1.6694-
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