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is any failure to make a reasonable attempt to comply with the
provisions of the internal revenue laws. Sec. 6662(c).
Moreover, negligence is the failure to exercise due care or
failure to do what a reasonable and prudent person would do under
the circumstances. Neely v. Commissioner, 85 T.C. 934, 947
(1985). Disregard includes any careless, reckless, or
intentional disregard of rules or regulations. Sec. 6662(c);
sec. 1.6662-3(b)(2), Income Tax Regs. No penalty will be imposed
with respect to any portion of any 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).
Respondent has satisfied his burden of production with
respect to the accuracy-related penalty under section 6662(a).
Sec. 7491(c). At trial, petitioner admitted that he took it upon
himself to “subtract” the $18,432 from his gross income because
he “didn’t think this was a dividend”. However, caveats about
the tax implications of the distribution of Nortel stock
permeated the Circular. Petitioner’s investment bank issued a
Form 1099-DIV, which reported the Nortel stock as an ordinary
dividend. In response to petitioner’s inquiry to the law firm
that handled the Joint Arrangement, petitioner was referred to
the tax implication sections in the Circular.
We find that petitioner has not shown reasonable cause for
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Last modified: May 25, 2011