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Section 6662(a) provides an accuracy-related penalty equal
to 20 percent of the underpayment required to be shown on a
return due to negligence or disregard of rules or regulations.
Sec. 6662(b)(1). For purposes of section 6662, the term
“negligence” includes “any failure to make a reasonable attempt
to comply with the provisions of * * * [the Code], and the term
‘disregard’ includes any careless, reckless, or intentional
disregard.” Sec. 6662(c). “Negligence” also includes any
failure by a taxpayer to keep adequate books and records or to
substantiate items properly. Sec. 1.6662-3(b), Income Tax Regs.
An accuracy-related penalty is not imposed with respect to
any portion of the underpayment as to which the taxpayer acted
with reasonable cause and in good faith. Sec. 6664(c)(1); see
Higbee v. Commissioner, supra at 448. This determination is made
based on all the relevant facts and circumstances. Higbee v.
Commissioner, supra at 448; sec. 1.6664-4(b)(1), Income Tax Regs.
“Relevant factors include the taxpayer’s efforts to assess his
proper tax liability, including the taxpayer’s reasonable and
good faith reliance on the advice of a professional such as an
accountant.” Higbee v. Commissioner, supra at 448-449.
Petitioner has failed to keep adequate records or to
substantiate properly the items in question. Respondent has
provided sufficient evidence to meet his burden of production.
Petitioner has not produced evidence to prove that respondent’s
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Last modified: May 25, 2011