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V. Accuracy-Related Penalties
Subsection (a) of section 6662 imposes an accuracy-related
penalty in the amount of 20 percent of any underpayment that is
attributable to causes specified in subsection (b). Subsection
(b)(1) of section 6662 then provides that among the causes
justifying imposition of the penalty is negligence or disregard
of rules or regulations.
“Negligence” is defined in section 6662(c) as “any failure
to make a reasonable attempt to comply with the provisions of
this title”, and “disregard” as “any careless, reckless, or
intentional disregard.” Caselaw similarly states that
“‘Negligence is a lack of due care or the failure to do what a
reasonable and ordinarily prudent person would do under the
circumstances.’” Freytag v. Commissioner, 89 T.C. 849, 887
(1987) (quoting Marcello v. Commissioner, 380 F.2d 499, 506 (5th
Cir. 1967), affg. on this issue 43 T.C. 168 (1964) and T.C. Memo.
1964-299), affd. 904 F.2d 1011 (5th Cir. 1990), affd. 501 U.S.
868 (1991). Pursuant to regulations, “‘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.
An exception to the section 6662(a) penalty is set forth in
section 6664(c)(1) and reads: “No penalty shall be imposed under
this part with respect to any portion of an underpayment if it is
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