Ricky Schmidt and Suzetta J. Schmidt - Page 28

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                                         11/30/95     11/30/96 11/30/97               
          Food for employees             $6,724      $8,760      $8,161               
          Meals & entertainment          994         1,338       1,369                
          Utilities--house                2,567        2,439      2,557               
          Total                          10,285      12,537      12,087               
          Issue 2. Accuracy-Related Penalty Under Section 6662(a)                     
               Respondent determined that Hillside Dairy is liable for the            
          accuracy-related penalty under section 6662(a).  As pertinent               
          here, section 6662(a) imposes a 20-percent penalty on the portion           
          of an underpayment attributable to negligence or disregard of               
          rules or regulations.  Sec. 6662(b)(1).  Negligence includes any            
          failure to make a reasonable attempt to comply with the                     
          provisions of the Internal Revenue Code.  Sec. 6662(c); sec.                
          1.6662-3(b)(1), Income Tax Regs.                                            
               The penalty under section 6662(a) does not apply to any                
          portion of an understatement of tax if it is shown that there was           
          reasonable cause for the taxpayer’s position and that the                   
          taxpayer acted in good faith with respect to that portion.  Sec.            
          6664(c)(1).  The determination of whether a taxpayer acted with             
          reasonable cause and in good faith is made on a case-by-case                
          basis, taking into account all the pertinent facts and                      
          circumstances.  Sec. 1.6664-4(b)(1), Income Tax Regs.  The most             
          important factor is the extent of the taxpayer’s effort to assess           
          his/her proper tax liability for the year.  Id.  The good faith             
          reliance on the advice of an independent, competent professional            






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Last modified: May 25, 2011