- 18 -
1.6662-3(b)(1), Income Tax Regs. The term "disregard" includes
any careless, reckless, or intentional disregard. Sec. 6662(c).
No penalty shall be imposed if it is shown that there was
reasonable cause for the underpayment and the taxpayer acted in
good faith with respect to the underpayment. Sec. 6664(c). The
determination of whether a taxpayer acted with reasonable cause
and in good faith is made on a case-by-case basis, taking into
account all pertinent facts and circumstances. The most
important factor is the extent of the taxpayer's effort to assess
the taxpayer's proper tax liability. "Circumstances that may
indicate reasonable cause and good faith include an honest
misunderstanding of fact or law that is reasonable in light of
* * * the experience, knowledge and education of the taxpayer."
Sec. 1.6664-4(b)(1), Income Tax Regs. (emphasis added); see
Reynolds v. Commissioner, 618 296 F.3d 607, 618 (7th Cir. 2002),
affg. T.C. Memo. 2000-20. This subjective analysis operates, in
effect, to hold knowledgeable tax professionals to a higher
standard of care than a regular taxpayer. See Reynolds v.
Commissioner, supra at 618 ("experience, knowledge and education"
proviso was fatal to taxpayer who was attorney, C.P.A., and IRS
audit supervisor); Knoll v. Commissioner, T.C. Memo. 2003-277
(lawyer experienced in tax-advantaged financing liable for
accuracy-related penalty for negotiating and structuring
settlement agreement to secure tax advantages valid in form but
Page: Previous 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 NextLast modified: May 25, 2011