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respect to the accuracy-related penalty. See sec. 7491(c);
Higbee v. Commissioner, 116 T.C. 438, 446 (2001).
An exception to the section 6662 penalty applies when the
taxpayer demonstrates: (1) There was reasonable cause for the
underpayment, and (2) the taxpayer acted in good faith with
respect to the underpayment. Sec. 6664(c). Whether the taxpayer
acted with reasonable cause and in good faith is determined by
the relevant facts and circumstances on a case-by-case basis.
See Stubblefield v. Commissioner, T.C. Memo. 1996-537; sec.
1.6664-4(b)(1), Income Tax Regs. “Circumstances that may
indicate reasonable cause and good faith include an honest
misunderstanding of fact or law that is reasonable in light of
all the facts and circumstances, including the experience,
knowledge, and education of the taxpayer.” Sec. 1.6664-4(b)(1),
Income Tax Regs.
It does not appear that petitioner’s husband was involved in
any of the above-described dealings with petitioner’s father and
Mr. Falcon. We therefore focus on petitioner. Petitioner
stopped attending school during the seventh grade and has a
limited command of English. It is not clear what petitioner
understood when the funds were deposited into the joint account
or when she signed the check payable to her father in the amount
of $415,000. It is clear that petitioner relied upon Mr.
Falcon’s advice during these financial transactions. Taking into
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Last modified: November 10, 2007