- 3 - Petitioners have conceded the deficiencies in tax as determined by respondent. Petitioners understated gross receipts on their Schedule C, Profit or Loss From Business, for all the years in issue. Petitioners have conceded that they understated gross receipts by $267,273 for 2003, which amount was nearly half of the actual gross receipts in that year. OPINION Under section 6662, a taxpayer may be liable for a penalty of 20 percent on the portion of an underpayment of tax attributable to a substantial understatement of tax. Sec. 6662(a). The term “substantial understatement” is defined as the greater of 10 percent of the tax required to be shown on the return for the taxable year or $5,000. Sec. 6662(d). However, the accuracy-related penalty is not imposed with respect to any portion of the understatement as to which the taxpayer acted with reasonable cause and in good faith. Sec. 6664(c)(1); Higbee v. Commissioner, 116 T.C. 438, 448-449 (2001). The decision as to whether the taxpayer acted with reasonable cause and in good faith depends upon all the pertinent facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. Relevant factors include the taxpayer’s efforts to assess his proper tax liability, including the taxpayer’s reasonable and good faith reliance on the advice of a tax professional. See id.Page: Previous 1 2 3 4 5 NextLast modified: March 27, 2008