- 33 -
checks, which Mr. Cutts then credited against ATV’s rent
obligation. Mr. Cutts is entitled to deduct the portion of
constructive interest payments allocable to ATV’s payments on the
Landmark Hall mortgage to the extent allowable under section 163,
which is to be determined in the Rule 155 computation. Because
there are no net amounts of interest due from ATV to Mr. Cutts,
we have no occasion to consider correlative questions of interest
deductibility by ATV.
Issue 3. Whether Petitioners Are Liable for the Section
6662 Accuracy-Related Penalty for the 1997 Tax Year
Respondent concedes petitioners are not liable for any
penalty with respect to any adjustments relative to the use of
Landmark Hall.14 The issue remains whether petitioners are
liable for the section 6662(a) accuracy-related penalty for
adjustments relative to unreported interest under section 7872.
Section 6662 imposes a penalty of 20 percent on
underpayments of tax attributable to negligence or disregard of
the rules or regulations. Petitioners can avoid this penalty if
they made a reasonable attempt to comply with the provisions of
the Internal Revenue Code, and they were not careless, reckless,
or in intentional disregard of rules or regulations. See sec.
6662(c); Accardo v. Commissioner, 942 F.2d 444, 452 (7th Cir.
14In his brief, respondent conceded the accuracy-related
penalty for all “expenses claimed by ATV relative to Landmark
Hall”, including the pool repair expense.
Page: Previous 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 NextLast modified: May 25, 2011