- 13 - Revenue Code, and “disregard” means any careless, reckless or intentional disregard. Sec. 6662(c). An underpayment is not subject to the penalty for negligence or for disregard of rules and regulations to the extent that the taxpayer shows that the underpayment is due to reasonable cause or good faith. Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43, 98 (2000), affd. 299 F.3d 221 (3d Cir. 2002); see also secs. 1.6662- 3(a), 1.6664-4(a), Income Tax Regs. A substantial understatement of tax is an understatement that exceeds the greater of 10 percent of the tax required to be shown on the tax return or $5,000. Sec. 6662(d)(1)(A). Without including the $160,400 in income, petitioner reported a tax due of $829, whereas respondent determined a tax due of $65,575 and a Federal income tax deficiency of $64,746. Petitioner understated her income tax for 2001 in an amount greater than $5,000 or 10 percent of the tax required to be shown on the return. Respondent has, therefore, met his burden of production with respect to petitioner’s substantial understatement of income tax. The accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment if it is shown that there was reasonable cause for the taxpayer’s position and that the taxpayer acted in good faith with respect to that portion. Sec. 6664(c)(1); sec. 1.6664-4(b), Income Tax Regs. Accordingly, wePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: March 27, 2008