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basis, taking into account all the pertinent facts and
circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. The
taxpayer’s education, experience, and knowledge are considered in
determining reasonable cause and good faith. And, generally, the
most important factor is the extent of the taxpayer’s effort to
assess his proper tax liability. Sec. 1.6664-4(b)(1), Income Tax
Regs.
Respondent determined an accuracy-related penalty to be
applicable in this case because petitioner understated his income
tax by $6,564 on his 2003 income tax return. Because
petitioner’s understatement of tax was greater than 10 percent of
the tax required to be shown on the return, or $5,000, the
understatement was deemed a substantial understatement of tax
pursuant to section 6662(d)(1)(A)(i) and (ii). Respondent
contends that petitioner’s failure to report income equaling
approximately 35 percent of his adjusted gross income for 2003
shows a lack of reasonable cause and good faith.
Petitioner argues that he should not be held liable for the
penalty because: (1) His failure to include the amount received
from the distribution was due to his move from New York City to
Palo Alto, California, in 2003, which resulted in his failure to
receive a Form 1099-MISC for the distribution, and (2) his
failure to remember to report the distribution was not
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