- 37 - 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, “‘Neglience’ 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. Section 6664(c) provides an exception to the penalty imposed under section 6662(a). “No penalty shall be imposed under this part with respect to any portion of an underpayment if it is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion.” Sec. 6664(c)(1). The determination of whether the taxpayer acted with reasonable cause and in good faith is made on a case-by-case basis, contemplating all of the relevant facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. Given the record before us, we sustain the negligence penalties. Mr. Sowards was not a credible witness; he offered inconsistent and implausible explanations to respondent’s employees and this Court. He intentionally disregarded the tax laws by attempting to surreptitiously characterize payments by STL to WPA as nontaxable loans. The failure to keep books and substantiate claimed deductions justifies the imposition of the penalties. See sec. 1.6662-3(b)(1), Income Tax Regs.Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Next
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