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the relevant facts and a reasonable basis for its treatment.
Sec. 6662(d)(2)(B).
Petitioner reported a tax due of $21,528 on his Federal
income tax return for 2002. He failed to include on his return
the income reported on Forms 1099-B, Proceeds From Broker and
Barter Exchange Transactions, and 1099-DIV, Dividends and
Distributions, outlined above, for the year at issue. Aside from
failing to disclose on the return the relevant facts related to
these items of income, petitioner has not presented any
substantial authority for his failure to include these items on
his return. Because the understatement exceeds both 10 percent
of the total tax required to be shown on the return and $5,000,
there was a substantial understatement of tax.2 Sec.
6662(d)(1)(A). Consequently, the penalty under section 6662(a)
applies unless petitioner had reasonable cause for the
underpayment and acted in good faith with respect to the
underpayment. Sec. 6664(c)(1).
The determination of whether a taxpayer acted with
reasonable cause and in good faith is made on a case-by-case
basis, taking into account all of the relevant facts and
2Petitioner’s Form 1040, U.S. Individual Income Tax Return,
for 2002 showed a tax due in the amount of $21,528. The total
tax required to be shown on the return was $46,945. Thus,
petitioner understated his income tax liability by $25,417. This
amount exceeds both $4,694.50, 10 percent of the total tax
required to be shown on the return, and $5,000.
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