William E. and Karen L. Kivett - Page 8

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          provisions of the Internal Revenue laws, and the term "disregard"           
          includes any careless, reckless, or intentional disregard of                
          rules or regulations.  Negligence is the lack of due care or                
          failure to do what a reasonable and ordinarily prudent person               
          would do under the circumstances.  See Neely v. Commissioner, 85            
          T.C. 934, 947 (1985).  Negligence also includes any failure by              
          the taxpayer to keep adequate books and records or to                       
          substantiate items properly.  Sec. 1.6662-3(b)(1), Income Tax               
          Regs.  Under section 6664(c), no penalty shall be imposed under             
          section 6662(a) with respect to any portion of an underpayment if           
          it is shown that there was a reasonable cause for such portion              
          and that the taxpayer acted in good faith with respect to such              
          portion.  The determination of whether a taxpayer acted with                
          reasonable cause and in good faith depends upon the facts and               
          circumstances of each particular case.  Sec. 1.6664-4(b)(1),                
          Income Tax Regs.  Relevant factors include the taxpayer's efforts           
          to assess his or her proper tax liability, the knowledge and                
          experience of the taxpayer, and reliance on the advice of a                 
          professional, such as an accountant.  Drummond v. Commissioner,             
          T.C. Memo. 1997-71, affd. in part and revd. in part without                 
          published opinion 155 F.3d 558 (4th Cir. 1998).  However, the               
          most important factor is the extent of the taxpayer's effort to             
          determine the taxpayer's proper tax liability.  Sec. 1.6664-                
          4(b)(1), Income Tax Regs.  An honest misunderstanding of fact or            

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