Neal N. and Ruby W. Viar - Page 17

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          includes any failure to exercise ordinary and reasonable care in            
          the preparation of a tax return, failure to keep books and                  
          records, or failure to substantiate items properly.  Sec. 1.6662-           
          3(b)(1), Income Tax Regs.  A return position that has a                     
          “reasonable basis” as defined in the regulation is not                      
          attributable to negligence.  Id.                                            
               An exception to the section 6662 penalty applies when the              
          taxpayer demonstrates that:  (1) There was reasonable cause for             
          the underpayment, and (2) the taxpayer acted in good faith with             
          respect to the underpayment.  Sec. 6664(c).  Whether the taxpayer           
          acted with reasonable cause and in good faith is determined by              
          the relevant facts and circumstances on a case-by-case basis.               
          Stubblefield v. Commissioner, T.C. Memo. 1996-537; sec. 1.6664-             
          4(b)(1), Income Tax Regs.  “Circumstances that may indicate                 
          reasonable cause and good faith include an honest                           
          misunderstanding of fact or law that is reasonable in light of              
          all the facts and circumstances, including the experience,                  
          knowledge and education of the taxpayer.”   Sec. 1.6664-4(b)(1),            
          Income Tax Regs.  A taxpayer is not subject to the addition to              
          tax for negligence where the taxpayer makes honest mistakes in              
          complex matters, but the taxpayer must take reasonable steps to             
          determine the law and to comply with it.  Niedringhaus v.                   
          Commissioner, 99 T.C. 202, 222 (1992).  The most important factor           
          is the extent of the taxpayer’s effort to assess the proper tax             

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