- 7 -
a credible explanation as to why the entire business premises
were needed for business purposes. On this record, we uphold
respondent’s disallowance of the $4,400 because petitioner did
not establish that that amount was an ordinary and necessary
business expense paid in 1998.
As to the accuracy-related penalty, section 6662(a) imposes
a 20-percent penalty on the portion of any underpayment of tax
attributable to negligence or disregard of rules or regulations.
Sec. 6662(b)(1). Negligence is any failure to make a reasonable
attempt to comply with the provisions of the internal revenue
laws and includes any failure by the taxpayer to keep adequate
books and records or to substantiate items properly. Sec.
6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. Moreover,
negligence is the failure to exercise due care or failure to do
what a reasonable and prudent person would do under the
circumstances. Neely v. Commissioner, 85 T.C. 934, 947 (1985).
Disregard includes any careless, reckless, or intentional
disregard of rules or regulations. Sec. 6662(c); sec. 1.6662-
3(b)(2), Income Tax Regs. No penalty will be imposed with
respect to any portion of any underpayment if it is shown that
there was a reasonable cause for such portion and that the
taxpayer acted in good faith with respect to such portion. Sec.
6664(c).
On this record, we conclude that petitioner is liable for
Page: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011