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disregard. Id. The Commissioner bears the burden of production
with 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. The most important factor is the extent of the
taxpayer’s effort to assess the proper tax liability.
Stubblefield v. Commissioner, supra; sec. 1.6664-4(b)(1), Income
As discussed above, petitioner worked for Onyx as a
warehouse employee, stocking and keeping inventory. After he was
terminated in 2002, petitioner had difficulty finding a new job.
Petitioner was evicted from his home and lived in his car for
several months because he could not pay the rent and had no other
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Last modified: November 10, 2007