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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.
Section 6662(d)(1)(A) provides that there is a substantial
understatement of income tax for any taxable year if the amount
of the understatement for the taxable year exceeds the greater
of: (1) 10 percent of the tax required to be shown on the return
for the taxable year, or (2) $5,000. The term “understatement”
means the amount of tax required to be shown on the return for
the taxable year, over the amount of tax imposed which is shown
on the return, reduced by any rebate. Sec. 6662(d)(2)(A). All
of the adjustments determined in the notice of deficiency have
been conceded or sustained. Petitioner’s return reported a tax
of $1,046. The amount of the deficiency is $6,225.
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, 116 T.C. 438, 448 (2001). 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
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Last modified: May 25, 2011