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Sec. 6664(c). The decision as to whether the taxpayer acted with
reasonable cause and in good faith depends upon all the pertinent
facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs.
The extent of the taxpayer's effort to assess his proper tax
liability is generally the most important factor in determining
reasonable cause and good faith. Id. The taxpayer has the burden
of proving that he acted with reasonable cause and in good faith.
Higbee v. Commissioner, supra at 446-449.
Petitioners concede that they did not include Mr. Sullivan's
wages from CEMAX in their 2000 return. Petitioners, however,
contend that they acted in good faith and exercised normal
business judgment in preparing their return. Although Mr.
Sullivan testified that he kept detailed weekly records on a
remodeling project that petitioners had undertaken during 2000,
he also stated that he only "knew roughly how much [he] made."
Mr. Sullivan stated that because of the amount of the
severance pay he had received from Phillips, he did not realize
that the CEMAX income was omitted from their return. He did not
examine the Forms W-2 carefully. He just "looked through them
quickly." He also contends that he did not receive a Form W-2
from CEMAX. Nevertheless, Mr. Sullivan received biweekly pay
statements from CEMAX documenting his wages. Petitioner did not
need to receive a Form W-2 to be alerted to the fact that he
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Last modified: May 25, 2011