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determine whether a rule or regulation exists, under
circumstances which demonstrate a substantial deviation from the
standard of conduct that a reasonable person would observe.”
Sec. 1.6662-3(b)(2), Income Tax Regs.
The section 6662(a) 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
also Higbee v. Commissioner, 116 T.C. 438, 448 (2001). The
decision as to whether a taxpayer acted with reasonable cause and
in good faith is made by taking into account all of the pertinent
facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs.
Relevant factors include the taxpayer’s efforts to assess his or
her proper tax liability, including an honest misunderstanding of
fact or law that is reasonable in light of all of the facts and
circumstances. Id.
Petitioner has made no argument that penalties should not be
sustained. Petitioner argues:
The Petitioner, over the years, would try many
different ways to resolve his losses. This was a major
mistake and a costly one on the Petitioner’s part in
learning that going against a municipal agency with
unlimited funds is an impossible task, especially when
you have no income. This is why the Petitioner started
writing off his losses as a bad debt knowing the IRS
[Internal Revenue Service] would pick it up and
challenge his claims and provide the Petitioner with an
avenue for a ruling by a U.S. court, granting the
Petitioner the right to declare the City of New York a
“bona fide debt”.
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Last modified: May 25, 2011