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to fraud. See sec. 6663(b). Petitioner consistently made
assertions throughout trial and in his brief that are not worthy
of belief. We have no reason to doubt Pascual’s credibility. On
consideration of the entire record, we conclude that petitioner
is liable for the fraud penalty under section 6663(a).
Accuracy-Related Penalty
Respondent concedes that Mrs. Said is not liable for the
fraud penalty under section 6663. Alternatively, respondent
argues that Mrs. Said is liable for the accuracy-related penalty
under section 6662(a) for all 3 years.
Under section 6662(a), a taxpayer may be liable for a
penalty of 20 percent on the portion of an underpayment of tax
attributable to a substantial understatement of tax or due to
negligence or disregard of rules or regulations. Sec. 6662(b).
Section 6662 shall not apply, however, to any portion of an
underpayment subject to the fraud penalty under section 6663.
Id.
The accuracy-related penalty cannot be imposed on one spouse
where the other spouse is liable for fraud. Under section
6663(c), the fraud penalty is imposed on each spouse separately,
even when a joint return is filed, whereas the accuracy-related
penalty is imposed jointly and severally. Where a joint return
is filed and one spouse is found liable for the fraud penalty,
imposing the accuracy-related penalty on the other spouse would
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