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Section 6662(a) Penalty
Section 6662(a) imposes a penalty in an amount equal to 20
percent of the portion of the underpayment of tax required to be
shown on a taxpayer’s return if the underpayment is due to
negligence or disregard of rules or regulations. Sec. 6662(a)
and (b)(1). Negligence is defined to include any failure to make
a reasonable attempt to comply with the provisions of the
Internal Revenue Code. Sec. 6662(c). It is further defined as
the failure to do what a reasonable person with ordinary prudence
would do under the same or similar circumstances. Neely v.
Commissioner, 85 T.C. 934, 947 (1985).
Petitioner claimed a theft loss deduction for property not
stolen. He claimed business expense deductions for a business
not in existence during 1998. That petitioner made such claims
is evidence that he failed to make a reasonable attempt to comply
with the provisions of the Internal Revenue Code. We therefore
find that the underpayment of tax required to be shown on
petitioner’s 1998 Federal income tax return is due to negligence.
Consequently, respondent’s imposition of the negligence penalty
is sustained.
Reviewed and adopted as the report of the Small Tax Case
Division.
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Last modified: May 25, 2011