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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.
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