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persuasive evidence that the penalty does not apply. Id. at 447.
The taxpayer may establish, for example, that an accuracy-related
penalty is inapplicable because it is attributable to an
understatement with respect to which the taxpayer acted with
reasonable cause and in good faith. Sec. 6664(c)(1). Whether a
taxpayer acted as such is a factual determination, in regard to
which the taxpayer’s effort to assess the proper tax liability is
an important consideration. Sec. 1.6664-4(b)(1), Income Tax
Regs.
Section 6662(a)(1) imposes a penalty in an amount equal to
20 percent of the portion of the underpayment attributable to
negligence or disregard of rules or regulations. Negligence
includes any failure by the taxpayer to keep adequate books and
records or to substantiate items properly. Sec. 1.6662-3(b)(1),
Income Tax Regs. The term “disregard” includes any careless,
reckless, or intentional disregard. Sec. 6662(c). Disregard of
rules or regulations is careless if the taxpayer does not
exercise reasonable diligence to determine the correctness of a
return position that is contrary to the rule or regulation. Sec.
1.6662-3(b)(2), Income Tax Regs. A taxpayer is not liable for
the penalty if he shows that he had reasonable cause for the
underpayment and that he acted in good faith. Sec. 6664(c).
Petitioners did not maintain adequate records to
substantiate the deductions they claimed on their 2001, 2002, and
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