Dale A. Rinehart and Jeana L. Yeager, f.k.a. Jeana L. Rinehart, et al. - Page 13

                                       - 13 -                                         
          determination regarding petitioners’ filing status for the years            
          in issue.12                                                                 
          II. Section 6662 Penalties                                                  
               Pursuant to section 6662(a), a taxpayer may be liable for a            
          penalty of 20 percent on the portion of an underpayment of tax              
          due to negligence or disregard of rules or regulations.13  Sec.             
          6662(b).  Section 6664(c)(1) provides that no accuracy-related              
          penalty shall be imposed with respect to any portion of an                  
          underpayment if it is shown that there was reasonable cause for             
          such portion and that the taxpayer acted in good faith with                 
          respect to such portion.  The decision as to whether the taxpayer           
          acted with reasonable cause and in good faith depends upon all              


               11(...continued)                                                       
          annulment only 1 month before Ms. Yeager filed her bankruptcy               
          petition.  Up until that time, and since that time, petitioners             
          held themselves out as being married.  Furthermore, as we                   
          previously stated, in order to obtain the annulment petitioners             
          supplied incorrect information to the Texas State court.  Their             
          attempt to claim that they were not married as a result of the              
          Decree of Annulment does not promote the purposes for which the             
          relation back doctrine was intended.                                        
               12  Petitioners also argue that respondent ignores his own             
          rulings, i.e., Rev. Rul. 76-255, 1976-2 C.B. 40, regarding the              
          effect of their annulment.  We disagree.  Petitioners’ situation            
          is factually similar to situation 2 in the revenue ruling--                 
          applying the sham transaction doctrine to taxpayers who divorced            
          because it would be advantageous for them to be unmarried at the            
          end of the calendar year, but who never intended to remain                  
          unmarried and did not remain unmarried.  See Boyter v.                      
          Commissioner, 668 F.2d 1382, 1387 (4th Cir. 1981).                          
               13  Sec. 7491(c) is not applicable to these cases.  See                
          supra note 8.                                                               





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