Reinaldo & Ernestina Moracen - Page 9




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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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