- 14 - Section 6662 Accuracy-Related Penalty Respondent determined a 20-percent penalty under section 6662(a) on the underpayment of tax resulting from the disallowed education expense deduction. Respondent asserts that the underpayment is attributable to negligence or disregard of rules or regulations. See sec. 6662(b)(1). For the purpose of section 6662, negligence includes any failure to make a reasonable attempt to comply with tax laws, and disregard includes any careless, reckless, or intentional disregard of rules or regulations. Sec. 6662(c). Section 6664 provides a defense if a taxpayer establishes that there was reasonable cause for the underpayment and that she acted in good faith with respect to that portion.9 Sec. 6664(c)(1); sec. 1.6664-4(a), Income Tax Regs.; see also United States v. Boyle, 469 U.S. 241, 243 (1985); Higbee v. Commissioner, 116 T.C. at 448. Although not defined in the Code, “reasonable cause” is viewed in the applicable regulations as the exercise of “ordinary business care and prudence”. Sec. 9 Petitioner’s counsel argued that the sec. 6662 accuracy- related penalty should be reduced because substantial authority exists to support petitioner’s deduction of her M.B.A. expenses, citing sec. 6662(d)(2)(B)(i). Counsel’s reliance on that section is misplaced because sec. 6662(d) relates to accuracy-related penalties imposed on substantial understatements of income tax under sec. 6662(b)(2). In this case, however, the misconduct for which respondent seeks to impose the accuracy-related penalty is negligence under sec. 6662(b)(1), not a substantial understatement under sec. 6662(b)(2). Sec. 6662(d)(2)(B)(i) is inapposite.Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 NextLast modified: March 27, 2008