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substantiate items properly. Sec. 6662(c); sec. 1.6662-3(b)(1),
Income Tax Regs. 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).
Under the facts of this case, section 6664(c) is not
applicable. Petitioner’s recordkeeping practice of creating
monthly lists from canceled checks simply is inadequate. Such
actions are not those of a prudent and reasonable person in
business. On this record, we conclude that petitioners were
negligent and are liable for the accuracy-related penalties under
section 6662 as determined by respondent for the taxable years in
issue. We need not address other grounds for respondent’s
determinations as to section 6662.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
under Rule 155.
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Last modified: May 25, 2011