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rules or regulations, or substantial understatement of income
tax. Respondent also determined that petitioner was liable for a
40-percent gross valuation overstatement penalty on the portions
of the underpayments attributable to petitioner’s claimed note
disposition losses. Alternatively, with respect to the note
disposition losses, respondent determined that petitioner was
liable for a 20-percent penalty under section 6662 due to
petitioner’s negligence, disregard of rules or regulations,
substantial understatement of income tax, or substantial
valuation misstatement.
Section 6662 imposes a 20-percent accuracy-related penalty
on the portion of an underpayment attributable to (1) negligence
or disregard of rules or regulations, (2) substantial
understatement of income tax, or (3) substantial valuation
misstatement under chapter 1 of the Internal Revenue Code. Sec.
6662(a), (b)(1), (2), and (3). In general, where a gross
valuation misstatement is involved, an accuracy-related penalty
under section 6662(a) is imposed in an amount equal to 40 percent
of the portion of an underpayment attributable to a gross
valuation misstatement. Sec. 6662(h)(1).
Negligence includes any failure to make a reasonable attempt
to comply with the provisions of the Internal Revenue Code or to
exercise ordinary and reasonable care in the preparation of a tax
return. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax Regs.
Negligence may be indicated where a taxpayer fails to make a
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