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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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Last modified: May 25, 2011