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that Mr. Abeyta was self-employed by the Department of the Air
Force for purposes of the self-employment tax. Therefore, we
conclude that petitioners are not liable for the self-employment
tax on the value of lodging provided to Mr. Abeyta. Accordingly,
we hold for petitioners on this issue.
C. Accuracy-Related Penalty
The last issue for decision is whether petitioners are
liable for an accuracy-related penalty pursuant to section
6662(a) for the year in issue.
Section 6662(a) imposes a penalty equal to 20 percent of any
underpayment of tax that is attributable to either (1) negligence
or disregard of rules or regulations or (2) a substantial
understatement of income tax. See sec. 6662(a), (b)(1) and (2).
The term “negligence” includes any failure to make a
reasonable attempt to comply with the Internal Revenue Code.
Sec. 6662(c). “Negligence” also includes any failure by the
taxpayer to keep adequate books and records or to substantiate
items properly. Sec. 1.6662-3(b)(1), Income Tax Regs. The term
“disregard” includes any careless, reckless, or intentional
disregard. Id.; sec. 1.6662-3(b)(2), Income Tax Regs.
An understatement of income tax is “substantial” if it
exceeds the greater of 10 percent of the tax required to be shown
on the return, or $5,000. Sec. 6662(d)(1)(A). As relevant
herein, an “understatement” is defined as the excess of the tax
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