Pansy V. Panages - Page 8

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          petitioner because (1) petitioner was negligent or disregarded              
          rules or regulations, or (2) petitioner’s deficiency represented            
          a substantial understatement of income tax.                                 
               Negligence is defined as “any failure to make a reasonable             
          attempt to comply with the provisions of this title”, and                   
          disregard includes “careless, reckless, or intentional                      
          disregard.”  Sec. 6662(c).  The Court holds that petitioner was             
          not negligent, nor did she disregard rules or regulations when              
          she filed as a professional gambler on her 2001 tax return.  She            
          consulted with an IRS agent and inquired as to how to file her              
          tax returns as a professional gambler.  She then followed the               
          guidelines of the agent, which were simply to include a Schedule            
          C with her income tax return.  The Court finds petitioner’s                 
          testimony credible.  Petitioner kept adequate records verifying             
          her level of gambling activity and attached the records to her              
          Schedule C.  In addition, once petitioner received the notice of            
          deficiency from respondent, she ceased her gambling activity                
          while awaiting a decision by this Court.  Petitioner’s actions              
          amount to reasonableness under section 6662(c), and her actions             
          are not considered by the Court to be “careless, reckless, or               
          intentional disregard.”                                                     
               Section 6662(b) also provides an addition to tax in the                
          amount of 20 percent for any “substantial understatement of                 
          income tax.”  A substantial understatement is defined as the                






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