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III. Section 6662(a) Accuracy-Related Penalty
The final issue for decision is whether petitioner is liable
for an accuracy-related penalty under section 6662(a) for the
year in issue.
Section 6662(a) imposes a penalty equal to 20 percent of any
underpayment of tax that is attributable to either negligence or
disregard of rules or regulations, or a substantial
understatement of income tax. See sec. 6662(a) and (b)(1) and
(2).
The term “negligence” includes any failure to make a
reasonable attempt to comply with the provisions of the internal
revenue laws. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax
Regs. The term “disregard” includes any careless, reckless, or
intentional disregard. Sec. 6662(c); sec. 1.6662-3(b)(2), Income
Tax Regs.
An understatement of income tax is “substantial” if it
exceeds the greater of 10 percent of the tax required to be shown
on the return, or $5,000. Sec. 6662(d)(1)(A). An
“understatement” is defined as the excess of the tax required to
be shown on the return over the tax actually shown on the return.
Sec. 6662(d)(2)(A).
Whether the accuracy-related penalty is applied because of
negligence or disregard of rules or regulations, or a substantial
understatement of tax, section 6664 provides an exception to
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