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available evidence, and petitioners’ refusal to testify, the
record in this case clearly shows that petitioners’ failure to
file their income tax returns on time was not due to reasonable
cause.
Respondent’s determinations that petitioners are liable for
additions to tax for 1994 and 1995 are sustained.
B. Accuracy-Related Penalties
Section 6662(a) provides that a taxpayer may be liable for a
penalty of 20 percent of the portion of an underpayment of tax
attributable to (1) a substantial understatement of tax, (2)
negligence or disregard of rules or regulations, or (3) any
substantial valuation misstatement. Sec. 6662(a) and (b)(1),
(2), and (3). The accuracy-related penalty does not apply to any
portion of an underpayment of tax if it is shown that there was
reasonable cause for such portion and that the taxpayer acted in
good faith. Sec. 6664(c)(1).
An “understatement of tax” is substantial if it exceeds the
greater of 10 percent of the tax required to be shown on the
return or $5,000. Sec. 6662(d)(1) and (2).
“Negligence” is defined as any failure to make a reasonable
attempt to comply with the provisions of the Internal Revenue
Code. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax Regs.
Generally, a taxpayer is negligent if he or she fails to make a
reasonable attempt to ascertain the correctness of a deduction,
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