William H. Mansel, Jr. and Angela W. Mansel - Page 8

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          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.  See Neely v. Commissioner, 85            
          T.C. 934, 947 (1985).  Under section 6664(c), no penalty shall be           
          imposed under section 6662(a) with respect to any portion of an             
          underpayment if it is shown that there was a reasonable cause for           
          such portion and that the taxpayer acted in good faith with                 
          respect to such portion.  The determination of whether a taxpayer           
          acted with reasonable cause and in good faith depends upon the              
          facts and circumstances of each particular case.  See sec.                  
          1.6664-4(b)(1), Income Tax Regs.  Relevant factors include the              
          taxpayer’s efforts to assess his or her proper tax liability, the           
          knowledge and experience of the taxpayer, and reliance on the               
          advice of a professional, such as an accountant.  See Drummond v.           
          Commissioner, T.C. Memo. 1997-71, affd. in part and revd. in part           
          without published opinion 155 F.3d 558 (4th Cir. 1998).  However,           
          the most important factor is the extent of the taxpayer’s effort            
          to determine the taxpayer’s proper tax liability.  See sec.                 
          1.6664-4(b)(1), Income Tax Regs.  An honest misunderstanding of             
          fact or law that is reasonable in light of the experience,                  
          knowledge, and education of the taxpayer may indicate reasonable            
          cause and good faith.  See Remy v. Commissioner, T.C. Memo. 1997-           

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