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authority for such treatment”. Sec. 6662(d)(2)(B)(i). In the
alternative, the amount of the understatement may be reduced by
that portion of the understatement which is attributable to any
item if (1) “the relevant facts affecting the item’s tax
treatment are adequately disclosed in the return or in a
statement attached to the return”, and (2) “there is a reasonable
basis for the tax treatment of such item by the taxpayer.” Sec.
6662(d)(2)(B)(ii).
The section 6662(a) penalty will not be 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); see
also Higbee v. Commissioner, 116 T.C. 438, 488 (2001). The
decision as to whether a taxpayer acted with reasonable cause and
in good faith is made by taking into account all of the pertinent
facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs.
Relevant factors include the taxpayer’s efforts to assess his or
her proper tax liability, including the taxpayer’s reasonable and
good faith reliance on the advice of a tax professional. See id.
Petitioner argues that it was reasonable for him to believe
that he received no substantial payments for punitive damages and
interest. Petitioner has not cited any substantial authority to
support his argument that the entire amount received under the
settlement agreement was excludable under section 104. Sec.
6662(d)(2)(B)(i). Though petitioner disclosed his receipt of the
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