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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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Last modified: May 25, 2011