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depends on careful entry of accurate information, which
petitioner manifestly failed to do. Petitioner admits that he
has the education to prepare and review his income tax return,
and that he had an opportunity to review his return prior to
filing it. Accordingly, petitioner’s use of software in
preparing his return does not constitute reasonable cause for the
errors in his return or for the deficiency in this case. The
amount of the substantial understatement penalty determined by
respondent will be modified to reflect the adjustments in
petitioner’s taxable income contained herein.
The deficiency in this case is also attributable to
negligence as defined in section 6662(c). The regulations
clarify that “The term ‘negligence’ includes any failure to make
a reasonable attempt to comply with the provisions of the
internal revenue laws or to exercise ordinary and reasonable care
in the preparation of a tax return. ‘Negligence’ also includes
any failure by the taxpayer to keep adequate books and records or
to substantiate items properly.” Sec. 1.6662-3(b), Income Tax
Regs. Thus, petitioner’s claims of deductible expenses, which
petitioner has not substantiated with any credible documentation,
support the imposition of the penalty under section 6662(a) on
the basis of negligence, even if the computation which will be
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Last modified: May 25, 2011