Emmanuel & Cecilia Abloso - Page 10

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          Regs.  Section 1.6662-3(b)(1), Income Tax Regs., provides that              
          negligence is strongly indicated where “A taxpayer fails to make            
          a reasonable attempt to ascertain the correctness of a deduction,           
          credit or exclusion on a return which would seem to a reasonable            
          and prudent person to be ‘too good to be true’ under the                    
          circumstances”.  “Disregard” has been described as any careless,            
          reckless, or intentional disregard.  Sec. 6662(c).                          
               Section 6664(c)(1) provides that the penalty under section             
          6662(a) shall not apply to any portion of an underpayment if it             
          is shown that there was reasonable cause for the taxpayer’s                 
          position with respect to that portion and that the taxpayer acted           
          in good faith with respect to that portion.  The determination of           
          whether a taxpayer acted with reasonable cause and in good faith            
          within the meaning of section 6664(c)(1) is made on a case-by-              
          case basis, taking into account all the pertinent facts and                 
          circumstances.  Sec. 1.6664-4(b)(1), Income Tax Regs.  The most             
          important factor is the extent of the taxpayer’s effort to assess           
          his proper tax liability for the year.  Id.  Section 1.6664-                
          4(b)(1), Income Tax Regs, specifically provides:  “Circumstances            
          that may indicate reasonable cause and good faith include an                
          honest misunderstanding of fact or law that is reasonable in                
          light of * * * the experience, knowledge, and education of the              
          taxpayer.”  See Neely v. Commissioner, 85 T.C. 934 (1985).                  
               Petitioners’ backgrounds have not been made part of the                






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