- 22 -
the Court did not overrule the relevancy objections at trial, we
do so here.
II. The Section 6662(a) Accuracy-Related Penalty
Section 6662(a) imposes an addition to tax of 20 percent on
the portion of an underpayment attributable to any one of various
factors, one of which is “negligence or disregard of rules or
regulations”. Sec. 6662(a) and (b)(1). “Negligence” includes
any failure to make a reasonable attempt to comply with the
provisions of the Internal Revenue Code, and “disregard of rules
or regulations” includes any careless, reckless, or intentional
disregard. Sec. 6662(c). The regulations under section 6662
provide that negligence is strongly indicated where:
A taxpayer fails to make a reasonable attempt to ascertain
the correctness of a deduction, credit or exclusion on a
return which would seem to a reasonable and prudent person
to be “too good to be true” under the circumstances * * * .
Sec. 1.6662-3(b)(1)(ii), Income Tax Regs.
Negligence is defined as the “‘lack of due care or failure
to do what a reasonable or ordinarily prudent person would do
under the circumstances.’” Neely v. Commissioner, 85 T.C. 934,
947 (1985) (quoting Marcello v. Commissioner, 380 F.2d 499, 506
(5th Cir. 1967), affg. in part and remanding in part on another
ground 43 T.C. 168 (1964)); see Allen v. Commissioner, 925 F.2d
348, 353 (9th Cir. 1991), affg. 92 T.C. 1 (1989). Negligence is
determined by testing a taxpayer’s conduct against that of a
reasonable, prudent person. Zmuda v. Commissioner, 731 F.2d
Page: Previous 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 NextLast modified: May 25, 2011