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Section 6662(a) imposes an accuracy-related penalty of 20
percent of the underpayment of tax attributable to negligence or
disregard of rules or regulations. Sec. 6662(a) and (b)(1).
Negligence is defined as “any failure to make a reasonable
attempt to comply with the provisions of this title”. Sec.
6662(c). However, no penalty will be imposed if the taxpayer had
reasonable cause for the underpayment of tax and the taxpayer
acted in good faith. Sec. 6664(c); sec. 1.6662-3(a), Income Tax
Regs.
The Commissioner bears the burden of production with respect
to penalties. Sec. 7491(c); Higbee v. Commissioner, 116 T.C.
438, 446-447 (2001). However, the taxpayer must show that he had
reasonable cause and acted in good faith. See Rule 142(a).
The parties stipulated that petitioners received, but did
not report, a State income tax refund of $3,249 in 2000. We find
that respondent has met his burden of production. Petitioners
have presented no evidence that their omission of the State
income tax refund from their 2000 return was the result of
reasonable cause. Accordingly, we hold that petitioners are
liable for the accuracy-related penalty pursuant to section
6662(a).
In reaching our holdings, we have considered all arguments
made, and, to the extent not mentioned, we conclude that they are
moot, irrelevant, or without merit.
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Last modified: May 25, 2011