Michael T. Hines - Page 6

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          satisfied his burden of production with respect to this penalty.            
          Section 6662(a) imposes a 20-percent penalty on the portion of              
          any underpayment of tax attributable to negligence or disregard             
          of rules or regulations.  Sec. 6662(b)(1).  Negligence 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.            
               In this case, section 6664(c) has not been satisfied.                  
          Although petitioner had access to tax advisers, nothing in the              
          record indicates that he had any basis for believing that he                
          could personally deduct the alleged expenses in issue.  Such                
          action is not that of a prudent and reasonable person in                    
          business.  We conclude that petitioner was negligent and is                 
          liable for the accuracy-related penalty under section 6662(a) as            
          determined by respondent.                                                   

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