James Edward and Brenda Dianne Starkovich - Page 7

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          includes an understatement of tax of $5,000 or more.  See sec.              
          6662(d); sec. 1.6662-4(b), Income Tax Regs.                                 
               Section 6664(c)(1) provides that the penalty under section             
          6662(a) shall not apply to any portion of an underpayment if it             
          is shown that there was reasonable cause for the taxpayer's                 
          position and that the taxpayer acted in good faith with respect             
          to that portion.  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 the pertinent facts and                      
          circumstances.  Sec. 1.6664-4(b)(1), Income Tax Regs.  The most             
          important factor is the extent of the taxpayer's effort to assess           
          his proper tax liability for the year.  Id.                                 
               Petitioner failed to keep adequate books and records                   
          reflecting his income.  See sec. 6662(c); sec. 1.6662-3(b)(1),              
          Income Tax Regs.  There is also an understatement of tax greater            
          than $5,000.  The Court concludes that respondent has produced              
          sufficient evidence to show that the accuracy-related penalty               
          under section 6662 is appropriate.  Nothing in the record                   
          indicates petitioners acted with reasonable cause and in good               
          faith.  The Court holds that the record supports respondent's               
          determination that petitioners are liable for the                           
          accuracy-related penalty.                                                   

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