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understatement is equal to the excess of the amount of tax
required to be shown in the tax return over the amount of tax
shown in the tax return, sec. 6662(d)(2)(A), and is substantial
in the case of an individual if it exceeds the greater of 10
percent of the tax required to be shown or $5,000, sec.
6662(d)(1)(A).
The accuracy-related penalty under section 6662(a) does not
apply to any portion of an underpayment if it is shown that there
was reasonable cause for, and that the taxpayer acted in good
faith with respect to, such portion. Sec. 6664(c)(1). The
determination of whether the taxpayer acted with reasonable cause
and in good faith depends on the pertinent facts and circum-
stances, including the taxpayer’s efforts to assess such tax-
payer’s proper tax liability, the knowledge and experience of the
taxpayer, and the reliance on the advice of a professional, such
as an accountant or an attorney. Sec. 1.6664-4(b)(1), Income Tax
Regs. The determination of whether a taxpayer acted with reason-
able cause and in good faith with respect to an underpayment that
is related to an item reflected in the return of a passthrough
entity is made on the basis of all the pertinent facts and
circumstances, including the taxpayer’s own actions, as well as
the actions of the passthrough entity. Sec. 1.6664-4(e), Income
Tax Regs. Reliance on the advice of a professional does not
necessarily demonstrate reasonable cause and good faith unless,
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