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On its 2000 Federal income tax return, petitioner deducted
the following amounts for the acquisition and operation of an
airplane: Operating expenses of $23,033, interest expenses of
$29,742, and depreciation of $128,289. Respondent disallowed
these deductions and determined that petitioner was liable for an
income tax deficiency of $43,698 and an accuracy-related penalty
of $8,740 for 2000.
OPINION
Pursuant to section 6662(a), a taxpayer may be liable for a
penalty of 20 percent on the portion of an underpayment of tax
(1) due to negligence or disregard of rules or regulations or (2)
attributable to a substantial understatement of tax. Sec.
6662(b). Whether applied because of a substantial understatement
of tax or negligence or disregard of rules or regulations, the
accuracy-related penalty is not imposed with respect to any
portion of the underpayment as to which the taxpayer acted with
reasonable cause and in good faith. Sec. 6664(c)(1). 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. Relevant
factors include the taxpayer’s efforts to assess his proper tax
liability, including the taxpayer’s reasonable and good faith
reliance on the advice of a professional such as an accountant.
See id.
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Last modified: May 25, 2011