Alexander Firsow and Camilla Thomas-Firsow, a.k.a. Camilla Thomas - Page 11

                                       - 10 -                                         
          Code.  Sec. 6662(c).  The term “disregard” includes any careless,           
          reckless, or intentional disregard.  Id.  Respondent has the                
          burden of production with respect to the accuracy-related                   
          penalties.  See sec. 7491(c).                                               
               The courts have refined the Code definition of negligence as           
          a lack of due care or failure to do what a reasonable and prudent           
          person would do under similar circumstances.  Allen v.                      
          Commissioner, 925 F.2d 348, 353 (9th Cir. 1991), affg. 92 T.C. 1            
          (1989).  Treasury regulations further provide that negligence               
          includes any failure to exercise ordinary and reasonable care in            
          the preparation of a tax return, failure to keep books and                  
          records, or failure to substantiate items properly.  Sec.                   
          1.6662-3(b)(1), Income Tax Regs.  A return position that has a              
          “reasonable basis” as defined in the regulation is not                      
          attributable to negligence.  Id.                                            
               An exception to the section 6662 penalty applies when the              
          taxpayer demonstrates:  (1) There was reasonable cause for the              
          underpayment, and (2) the taxpayer acted in good faith with                 
          respect to the underpayment.  Sec. 6664(c).2  Whether the                   
          taxpayer acted with reasonable cause and in good faith is                   
          determined by the relevant facts and circumstances on a                     
          case-by-case basis.  See Stubblefield v. Commissioner, T.C. Memo.           

               2  This section may provide relief even if a return position           
          does not satisfy the reasonable basis standard.  Sec. 1.6662-               
          3(b)(3), Income Tax Regs.                                                   





Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  Next

Last modified: May 25, 2011