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Internal Revenue Code. See sec. 6662(c); sec. 1.6662-3(b)(1),
Income Tax Regs. A taxpayer may avoid the application of the
accuracy-related penalty by proving that he or she acted with
reasonable cause and in good faith. See sec. 6664(c). Whether a
taxpayer acted with reasonable cause and in good faith is
measured by examining the relevant facts and circumstances, and
most importantly, the extent to which he or she attempted to
assess the proper tax liability. See Neely v. Commissioner, 85
T.C. 934 (1985); Stubblefield v. Commissioner, T.C. Memo. 1996-
537; sec. 1.6664-4(b)(1), Income Tax Regs.
Although there were numerous employees in the corporation,
only petitioner and Mr. Sullivan, the chief operating officer,
did not have their bonuses reported on a Form W-2. Deductions
were claimed with respect to all of the bonuses paid by the
corporation, including those paid to petitioner and Mr. Sullivan.
Petitioner has emphasized that she was a close personal friend of
Dr. Deland, who made the ultimate decisions regarding bonuses,
and petitioner has argued that the $25,000 and $35,000 payments
were gifts from Dr. Deland.
For the 1993 tax year, petitioner and Mr. Williams’s joint
return was professionally prepared. Petitioner contends that she
did not pay much attention to her Form W-2 for 1993 and simply
provided the documents received from various employers and payers
to the return preparer.
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