-15-
understated their tax by $11,814 for 2000 and $8,497 for 2001.
Accordingly, Mr. and Mrs. Hargrove have understated their tax for
each relevant year by the greater of 10 percent of the tax
required to be shown on the return, or $5,000.
Mr. and Mrs. Breeding reported they owed income tax of
$22,235 for 2000 and $23,169 for 2001.13 Respondent determined
that they owed $35,467 for 2000 and $36,651 for 2001. Mr. and
Mrs. Breeding understated their tax by $13,232 for 2000 and
$13,482 for 2001. Accordingly, Mr. and Mrs. Hargrove have
understated their tax for each relevant year by the greater of 10
percent of the tax required to be shown on the return, or $5,000.
The accuracy-related penalty under section 6662(a) does not
apply to any portion of an underpayment, however, if it is shown
that there was reasonable cause for the taxpayer’s position and
that the taxpayer acted in good faith with respect to that
portion. Sec. 6664(c)(1); sec. 1.6664-4(b), Income Tax Regs.
The determination of whether a taxpayer acted with reasonable
cause and in good faith is made on a case-by-case basis, taking
into account all the pertinent facts and circumstances, including
the taxpayer’s efforts to assess his or her proper tax liability
and the knowledge and experience of the taxpayer. Sec. 1.6664-
4(b)(1), Income Tax Regs. The taxpayer bears the burden of proof
13None of petitioners’ returns for the relevant years was
introduced in evidence. We have used the amounts reflected in
the deficiency notice for the amounts petitioners reported on
their returns. We note there is a slight discrepancy between the
amounts we use and the amounts that petitioners stipulated, but
this difference is immaterial.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011