Edmund T. MacMurray - Page 6




                                        - 5 -                                         
          basis standard is not satisfied by a return position that is                
          merely arguable or a colorable claim.  Id.  Petitioner did                  
          disclose the receipt of his settlement award by attaching the               
          Form 1099-MISC and an explanatory addendum to his return.  He did           
          not, however, have a reasonable basis for his position.  Thus, a            
          reduction in the understatement, for purposes of the accuracy-              
          related penalty, is not warranted.                                          
               Section 6664(c)(1) provides that no penalty shall be imposed           
          if a taxpayer demonstrates that there was reasonable cause for              
          the underpayment and the taxpayer acted in good faith.  The                 
          determination of whether a taxpayer acted with reasonable cause             
          and in good faith depends upon the facts and circumstances,                 
          including the experience, knowledge, and education of the                   
          taxpayer.  See sec. 1.6664-4(b)(1), Income Tax Regs.                        
               Petitioner maintains that he attached the Form 1099-MISC to            
          his return as “a good-faith effort to show that * * * [he] had              
          received something that wasn’t subject to tax.”  Petitioner, a              
          lawyer who had previously worked with the Internal Revenue                  
          Service, failed, however, to make even a minimal effort to                  
          determine whether his position was correct.  In short, he did not           
          act with reasonable cause when he failed to report his settlement           
          award as taxable income.  Accordingly, he is liable for the                 
          section 6662(a) accuracy-related penalty.                                   








Page:  Previous  1  2  3  4  5  6  7  Next 

Last modified: November 10, 2007