Robert L. and Brenda J. Tarter - Page 14

                                       - 14 -                                         
         petitioner’s Schedule C; therefore, we sustain respondent’s                  
         determination with respect to depreciation.3                                 
         E.   Accuracy-Related Penalty                                                
              Respondent determined that petitioners are liable for an                
         accuracy-related penalty under section 6662(a).  Section 6662(a)             
         imposes an accuracy-related penalty equal to 20 percent of the               
         portion of an underpayment that is attributable to, among other              
         things, negligence.  Petitioners will avoid this penalty if the              
         record shows that they were not negligent; i.e., they made a                 
         reasonable attempt to comply with the provisions of the Code and             
         they were not careless, reckless, or in intentional disregard of             
         rules or regulations.  See sec. 6662(c); Keeler v. Commissioner,             
         243 F.3d 1212, 1221 (10th Cir. 2001), affg. Leema Enters., Inc.              
         v. Commissioner, T.C. Memo. 1999-18.  Negligence connotes a lack             
         of due care or failure to do what a reasonable and prudent person            
         would do under the circumstances.  See Allen v. Commissioner, 92             
         T.C. 1 (1989), affd. 925 F.2d 348 (9th Cir. 1991).  An                       

               3As noted above, on Nov. 30, 2005, CID agents executed                 
          simultaneous search warrants at petitioner’s business and the               
          payroll company, and respondent has remained in possession of               
          those materials through the date of trial.  The record does not             
          provide support that this circumstance impaired petitioners’                
          preparations for and offering of evidence at trial.  In fact,               
          after this case was set for trial, respondent moved for                     
          continuance, but petitioners opposed that motion; and the request           
          for continuance was denied.  Further, Perez testified that the              
          information she had used to prepare petitioner’s Schedule C came            
          from the Quickbooks accounting system that she used and that she            
          had been able to restore that information from Quickbooks files             
          backups that had not been seized.                                           

Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  Next 

Last modified: November 10, 2007