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the taxpayer on his return plus the amounts not so shown
previously assessed (or collected without assessment) over the
amount of rebates made. Sec. 6664(a).
“Negligence” is defined as “any failure to make a reasonable
attempt to comply with the provisions of this title” and
“disregard” means “any careless, reckless, or intentional
disregard.” Sec. 6662(c). Similarly, caselaw defines negligence
as a lack of due care or “‘the failure to do what a reasonable
and ordinarily prudent person would do under the circumstances.’”
Freytag v. Commissioner, 89 T.C. 849, 887 (1987) (quoting
Marcello v. Commissioner, 380 F.2d 499, 506 (5th Cir. 1967),
affg. on this issue 43 T.C. 168 (1964) and T.C. Memo. 1964-299)),
affd. 904 F.2d 1011 (5th Cir. 1990), affd. 501 U.S. 868 (1991).
Pursuant to the regulations, “‘Negligence’ also includes any
failure by the taxpayer to keep adequate books and records or to
substantiate items properly.” Sec. 1.6662-3(b)(1), Income Tax
Regs.
There is a “substantial understatement” of tax if “the
amount of the understatement for the taxable year exceeds the
greater of” (1) 10 percent, or (2) $5,000. Sec. 6662(d)(1)(A).
An “understatement” means the excess of the amount of tax
required to be shown on the return for the year over the amount
of tax shown on the return. Sec. 6662(d)(2)(A). However, as
applicable here, the amount of the understatement is reduced by
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