- 17 - difference between $159,008 and zero exceeds both 10 percent of $159,008, or $1,590, and $5,000. Accordingly, the understatement was substantial. Section 6664(c)(1) provides that the accuracy-related penalty 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 of 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. “Circumstances that may indicate reasonable cause and good faith include an honest misunderstanding of fact or law that is reasonable in light of all of the facts and circumstances, including the experience, knowledge, and education of the taxpayer.” Id. Petitioner does not qualify for section 6664(c)(1) relief. Under the circumstances, petitioner’s failure to consult an accountant or other tax professional was unreasonable. See Marr v. Commissioner, T.C. Memo. 1995-250 (finding taxpayer negligent for claiming theft loss without consulting tax professional). Petitioner claimed a very large deduction that resulted inPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Next
Last modified: May 25, 2011