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or the failure to do what a reasonable and prudent person would
do under the circumstances. Allen v. Commissioner, 925 F.2d 348,
353 (9th Cir. 1991), affg. 92 T.C. 1 (1989); Zmuda v.
Commissioner, 731 F.2d 1417, 1422 (9th Cir. 1984), affg. 79 T.C.
714 (1982); Neely v. Commissioner, 85 T.C. 934, 947 (1985).
"Disregard" includes any careless, reckless, or intentional
disregard of rules or regulations. See sec. 6662(c); sec.
1.6662-3(b)(2), Income Tax Regs. No penalty will be imposed with
respect to any portion of an underpayment if it is shown that
there was reasonable cause for such portion and that the taxpayer
acted in good faith with respect to such portion. See sec.
6664(c).
Mr. Spanier acknowledges that Ms. Spanier is the custodial
parent of their children. However, he still claimed dependency
exemption deductions for them despite the fact that he had not
obtained a waiver of the exemptions from Ms. Spanier. While Mr.
Spanier took steps in State court in 2003 to obtain a
clarification of his right to claim dependency exemption
deductions for his children, his rights were not clear when he
filed his 1998 tax return. The court order allowing him the
exemptions was not issued until 2003. The State court had not
previously addressed the issue, and Mr. Spanier should have noted
that fact when preparing his income tax return for 1998. See
Nieto v. Commissioner, T.C. Memo. 1992-296. Therefore, the Court
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