Elliot Virgil Wilkerson - Page 19

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          6662(d)(1)(A).9  Tax is not understated to the extent that the              
          treatment of the item related thereto is based on substantial               
          authority or is adequately disclosed in the return or in a                  
          statement attached to the return, and there is a reasonable basis           
          for the tax treatment of such item by the taxpayer.  Sec.                   
               Moreover, the accuracy-related penalty does not apply with             
          respect to any portion of an underpayment if it is shown that               
          there was reasonable cause for the underpayment and the taxpayer            
          acted in good faith with respect to the underpayment.  Sec.                 
          6664(c)(1).  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           
          the taxpayer’s proper tax liability for such year.  Id.                     
               Based on petitioner’s own admitted concessions of unreported           
          income, a prima facie case exists for imposition of the penalty.            
          Petitioner appears to contend that he did in fact report his                
          income tax on the revised Form 1040 after he did not receive a              
          response from respondent concerning the tax characterization of             

               9  For purposes of “the amount shown as the tax by the                 
          taxpayer on his return”, the revised Form 1040 is not a                     
          “qualified amended return” in determining whether petitioner                
          understated his income tax.  Sec. 1.6664-2(a), (c), Income Tax              

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Last modified: May 25, 2011