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substantial understatement of income tax. As noted above, the
burden of production is on respondent. Sec. 7491(c).
Section 6662(a) provides that, if it is applicable to any
portion of an underpayment in tax, there shall be added to the
tax an amount equal to 20 percent of the portion of the
underpayment to which section 6662 applies. Section 6662(b)(1)
provides that section 6662 shall apply to any underpayment
attributable to negligence or disregard of rules or regulations.
Section 6662(b)(2) provides that section 6662 shall apply to any
substantial understatement of income tax.
Section 6662(c) provides that the term "negligence" includes
any failure to make a reasonable attempt to comply with the
provisions of the internal revenue laws, and the term "disregard"
includes any careless, reckless, or intentional disregard of
rules or regulations. Negligence is the lack of due care or
failure to do what a reasonable and ordinarily prudent person
would do under the circumstances. Neely v. Commissioner, 85 T.C.
934, 947 (1985).
Under section 6662(d)(1), there is a substantial
understatement of income tax if the amount of the understatement
exceeds the greater of (1) 10 percent of the tax required to be
shown on the return or (2) $5,000. For purposes of section
6662(d)(1), "understatement" is defined as the excess of tax
required to be shown on the return over the amount of tax that is
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