§6662 — Imposition of accuracy-related penalty on underpayments

at 446), supplementing and overruling in part 147 T.C.

Accordingly, we will overrule in part and sustain in part respondent’s disallowance of Mr.

485, 493 (2017), supplementing and overruling in part 147 T.C.

In Loper Bright the Supreme Court overruled Chevron U.S.A.

485, 493 (2017), supplementing and overruling in part 147 T.C.

36 [*36] overruling in part 147 T.C.

1982), overruled on other grounds by Sandin v.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

16 [*16] overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017) (citing § 7491(c)), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 492–93 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 494–98 (2017), supplementing and overruling in part 147 T.C.

No copy of Palmarini Inc.’s corporate bylaws was produced in these cases; but even if we assume their existence, a corporation’s bylaws do not overrule the federal income tax consequences of a corporation’s distributions to its shareholders.

The Court overruled petitioners’ objections to Exhibits 1003-R, 1004-R, 1005-R, and 1006-R and admitted these Exhibits into evidence.

485, 492–93 (2017), supplementing and overruling in part Graev v.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supple- -21- [*21] menting and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485 (2017), supplementing and overruling in part 147 T.C.

485 (2017), supplementing and overruling in part 147 T.C.

485 (2017), supplementing and overruling in part 147 T.C.

485, 494-498 (2017), supplementing and overruling in part 147 T.C.

485, 494-498 (2017), supplementing and overruling in part 147 T.C.

485, 494-498 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485 (2017), supplementing and overruling in part 147 T.C.

485 (2017), supplementing and overruling in part 147 T.C.

2015-42), supplementing and overruling in part 147 T.C.

2015-42), supplementing and overruling in part 147 T.C.

485 (2017), supplementing and overruling in part, 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 492-493 (2017), supplementing and overruling in p_gt 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 492-493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485, 493 (2017), supplementing and overruling in part 147 T.C.

485 (2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

With this amendment, Congress explicitly sought to overrule our holding in Estate ofYoung and clarify that the Tax Court hasjurisdiction over additions to tax under section 6651(a)(2) "for failure to pay an amount shown on the return where the Tax Court already hasjurisdiction to redetermine a deficiency in tax with respect to that return."3 See H.R.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part Graev II, 147 T.C.

20, 2017), supplementing and overruling in part Graev v.

2015-42), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

2015-42), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

20, 2017), supplementing and overruling in part 147 T.C.

Lastly, we note that petitioner's reliance on our decisions in Cronan and Beaumont is misplaced as both those decisions involved tax years before the effective date, and were superseded by the 1934 enactment, ofsection 23(g).

Lastly, we note that petitioner's reliance on our decisions in Cronan and Beaumont is misplaced as both those decisions involved tax years before the effective date, and were superseded by the 1934 enactment, ofsection 23(g).

The Robinsons, and not their software, were responsible for their positions that we have overruled.

We overrule petitioner's oral objection.3 3We note that petitioner admittedreceipt ofthe full $17,000 in his petition: "In about April 2008, Dealer agreed to compensate petitioner for some ofhis loss, in the sum of$17,000.

Petaluma Superseded by Mayo Found.

Circuit noted: It appears that the Tax Court may have recently altered or overruled the Petaluma III decision under review in the case.

In addition, the Court referenced Rule 174(b), which provides : "Trials of small tax cases will be conducted as informally as possible consistent with orderly procedure, and any evidence deemed by the Court to have probative value shall be admissible ." The Court then overruled respondent's objection .

The reasons for our overruling respondent’s denial of relief regarding the section 6662(a) penalty applicable to the retirement distribution proceeds are as follows: Section 6662(a) does not apply to “any portion of an underpayment if it is shown that there was a reasonable cause for such portion and that the taxpayer acted in g

§ 6662(d)(1)(B). The requirements of a substantial understatement have been met. While the burden of production with respect to the imposition of penalties under section 6662 generally lies with the Commissioner, see § 7491(c), such is not the case when the Notice of Deficiency determines a penalty against a corporation. Dynamo Holdings Ltd. P’ship. v. Commissioner, 150 T.C. 224, 231–32 (2018) (citing NT, Inc. v. Commissioner, 126 T.C. 191 (2006)).8 The penalty does not apply to any portion of a

10–11, section 6662(b)(6) does not apply for the 2013 taxable year.

§ 6662(a), (b)(1)–(3), (c), (d), (e), and (h). P filed a Motion for Partial Summary Judgment, citing SEC v. Jarkesy, 144 S. Ct. 2117 (2024), and contending that the accuracy-related penalty R determined under I.R.C. § 6662 is not assessable as a matter of law because of the application of U.S. Const. amend. VII. Held: U.S. Const. amend. VII does not apply to suits against the sovereign, and Congress has not otherwise consented to trial by jury in TEFRA partnership-level actions.

Petitioner claimed that in that case, “the court held that the second-level excise tax under [section] 4941(a) is ‘imposed’ when liability for it becomes final, ‘clearly not’ when the statutory notice is mailed.” Adams is inapposite; it involved a section 4941 “second-level tax” that was part of an odd statutory scheme in which “the second-level tax is not imposed, assuming no correction occurs, until the expiration of the correction period.

Respondent also argues that Petitioners are precluded by section 469 from claiming such credits because they did not have any taxable income from passive activities in the years at issue and that Petitioners are liable for accuracy-related penalties under section 6662(a) because their underpayments for those years are attributable to negligence. See § 6662(a), (b)(1), (c). Petitioners counter that section 469 does not apply with respect to credits under section 48, that they had sufficient bases

Reasonable Cause and Good Faith The section 6662(a) accuracy-related penalty does not apply with respect to any portion of an underpayment if the taxpayer proves that there was reasonable cause for such portion and that she acted in good faith with respect thereto.

Unlike the section 6663 fraud penalty, the accuracy-related penalty requires the Commissioner to carry the burden of production but not the burden of proof with respect to the accuracy-related penalty. I.R.C. § 7491(c); Rule 142(a); Higbee, 116 T.C. at 446–49. Given the amount of net profit that we have redetermined for each year in issue, Mr. Alvarado clearly has a substantial understatement of income tax for each year. The accuracy-related penalty under section 6662(a) and (b)(2) does not appl

The Imposition of the Accuracy-Related Penalty Section 6662(a) and (b)(1) imposes a penalty equal to 20% of the portion of an underpayment of tax required to be shown on a taxpayer’s 14 The foregoing facts are distinguishable from those in Crescent Holdings, LLC, 141 T.C.

§ 6662(e), (h). Since no evidence has been introduced about the correct valuation of the contributed property, we are unable to conclude that the property was substantially or grossly overvalued. Accordingly, section 6664(c)(3) does not apply, and the reasonable cause and good faith defense in section 6664(c)(1) is available to petitioners with respect to the penalties arising from the denied charitable contribution deductions for 2015.

6662(d)(1)(B). The Commissioner has no burden of production with respect to the penalty where (as here) the taxpayer is a corporation. NT, Inc. v. Commissioner, 126 T.C. 191, 195 (2006) (noting that by its terms section 7491(c), which places the burden of production with respect to penalties on the Commissioner, does not apply to corporations, only “individual[s]”).

Section 6662(a) Penalty The Commissioner bears the burden of production with respect to the penalty imposed by section 6662(a). See sec. 7491(c). This burden of production includes producing evidence that respondent complied with the procedural requirements of section 6751(b). Respondent’s automated underreporter program detected the deficiency, and section 6751(b) does not apply to automated penalties.

6662(d)(1)(A). The record shows (and petitioners do not dis- pute) that the understatements ofincome tax determined in the notice ofdeficien- cy, which we have sustained, exceed $5,000 and 10% ofthe total tax required to be shown on petitioners' returns for 2009 and 2011. Respondent has thus carried his burden ofproduction by demonstrating a "substantial understatement ofin- come tax." See sec. 7491(c). The section 6662 penalty does not apply to any portion ofan underpayment "ifit is shown that

The section 6662(a) penalty does not apply to any portion ofan underpayment "ifit is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith" with respect to it.

Pursuant to section 6664(c)(1), the accuracy-related penalty under section 6662 does not apply to any portion ofan underpayment for which a taxpayer establishes that he or she: (1) had reasonable cause and (2) acted in good faith.

Reliance upon the advice ofa tax professional may establish reasonable cause and good faith for the purpose ofavoiding liability for the section 6662(a) penalty. See United States v. °(...continued) does not apply to a "penalty automatically calculated through electronic means." Sec.

6662(c). Since petitioner is a corporation, respondent has no burden ofproduction with respect to the penalty. See sec. 7491(c) (providing that the Secretary shall have the burden ofproduction "with respect to the liability ofany individual for any penalty"); NT, Inc. v. Commissioner, 126 T.C. 191, 195 (2006). The section 6662 penalty does not apply to any portion ofan underpayment "ifit is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with re

The accuracy-related penalty under section 6662(a) does not apply to any portion ofan underpayment ifit is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, such portion.

6662(a), (b)(2), (d)(1)(A). Petitioners reported tax liabilities of$17,111, $1,013, and $2,730 on their returns for 2013, 2014, and 2015, respec- tively. The notice ofdeficiency determined tax liabilities of$71,034, $20,411, and $13,953, respectively. Although respondent's concessions will reduce those liabilities slightly, it is obvious that petitioners' understatement ofincome tax for each year will be "substantial." See sec. 6662(d)(1). The section 6662 penalty does not apply to any portion o

Thus, respondent has met his burden ofproduction with respect to the section 6662(a) penalties for negligence.5 The accuracy-related penalty does not apply with respect to any portion of the underpayment for which it is shown that the taxpayerhad reasonable cause and acted in good faith.

6662(d)(2)(A). An understatement is substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year exceeds the greater of 10 percent ofthe tax required to be shown in the tax return for that year or $5,000. Sec. 6662(d)(1)(A). The accuracy-related penalty does not apply to any portion ofan under- payment ifit is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, such portion.

6662 penalties, to be computed in accordance with the issues decided in this case. Consistent with the holding ofRafizadeh v. Commissioner, 150 T.C. __ (Jan. 2, 2018), respondent concedes that sec. 6501(e)(1)(A)(ii) (generally providing a six-year limitations period with respect to an omission from gross income exceeding $5,000 and attributable to assets for which information reporting is required under sec. 6038D) is inapplicable.

6662(d)(1)(A). The accuracy-related penalty does not apply with respect to any portion of the underpayment for which the taxpayer shows that there was reasonable cause and that he or she acted in good faith.

While section 7491(c) places a burden ofproduction on the Commissioner with respect to an individual taxpayer's liability for an accuracy-related penalty under section 6662, section 7491(c) does not apply where the taxpayer is a corporation.

el's return-preparer defense to the accuracy-related penalties At trial, the only real issue raised by Asad and Akel was that because a professional tax-return preparer prepared their 2008 and 2009 returns, they should be relieved from liability for the accuracy-related penalties imposed by section 6662. That penalty does not apply ifthe tax returns were prepared by a professional tax-return preparer and ifcertain other conditions are met.

6662(b)(1), or a substantial understatement oftax, sec. 6662(b)(2). The accuracy-related penalty under section 6662(a) does not apply to any portion ofan underpayment ifit is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, such portion.

While section 7491(c) places a burden ofproduction on the Commissioner with respect to an individual taxpayer's liability for an accuracy-related penalty under section 6662, section 7491(c) does not apply where the taxpayer is a corporation.

6662(d)(1)(A). Under section 7491(c), the Commissioner bears the burden ofproduction with respect to the liability for any penalty. See Higbee v. Commissioner, 116 T.C. at 446. Once the Commissioner satisfies his burden, the burden shifts to the taxpayers to prove that the penalty does not apply.

el's return-preparer defense to the accuracy-related penalties At trial, the only real issue raised by Asad and Akel was that because a professional tax-return preparer prepared their 2008 and 2009 returns, they should be relieved from liability for the accuracy-related penalties imposed by section 6662. That penalty does not apply ifthe tax returns were prepared by a professional tax-return preparer and ifcertain other conditions are met.

Respondent has thus satisfied section - 9 - 7491(c) by carrying his burden ofproduction ofdemonstrating a "substantial understatement ofincome tax" under section 6662(b)(2).2 The section 6662 penalty does not apply to any portion ofan underpayment "ifit is shown that there was a reasonable cause for such portion and that the tax- payer acted in good faith" with respect to it.

6662(h)(1). An accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment oftax for which a taxpayerhad reasonable cause and acted in good faith.

6662(h)(1). An accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment oftax for which a taxpayerhad reasonable cause and acted in good faith.

Unlike with the 20% section 6662 accuracy-related penalty, petitioners may not claim reasonable cause to avoid liability for the 40% gross valuation misstatement penalty.

Beckey's trade or business (as distinguished from a corporation), and they failed to substantiate the expenses. Because we sustain the Commissioner's determinations, the understatements ofincome tax are substantial. The Commissioner also established that the Beckeys were negligent in failing to maintain adequate records. Because the Beckeys did not provide a defense to the penalties, they are liable for section 6662(a) accuracy-related penalties.

6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. The section 6662(a) accuracy-related penalty does not apply with respect to any portion ofan underpayment ifthe taxpayerproves that there was reasonable cause for such portion and that he acted in good faith with respect thereto.

The partnerships argue that section 6662(a) is inapplicable because there was no substantial understatement ofincome tax or negligence or disregard of rules and regulations.

The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofan underpayment ifthe taxpayerproves that there was reasonable cause for such portion and that he acted in good faith.

6211, 6662(d)(2), 6664(a). That being so, it is petitioners' burden to establish that the imposition ofthe penalty is not appropriate. See Higbee v. Commissioner, 116 T.C. 438, 447 (2001); see also Rule 142(a); Welch v. Helvering, 290 U.S. at 115. Section 6664(c)(1) provides that the section 6662(a) accuracy-related penalty does not apply to any portion ofan underpayment ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the unde

The partnerships argue that section 6662(a) is inapplicable because there was no substantial understatement ofincome tax or negligence or disregard of rules and regulations.

The section 6662 penalty is inapplicable to the extent the taxpayer had reasonable cause for the underpayment and acted in good faith.

The partnerships argue that section 6662(a) is inapplicable because there was no substantial understatement ofincome tax or negligence or disregard of rules and regulations.

Section 6664(c)(1) provides that the section 6662(a) accuracy-related penalty does not apply to any portion ofan underpayment ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment.

Section 6662 Penalties A. Overview Section 6662(a) and (b)(1) and (2) imposes a 20% accuracy-relatedpenalty on the portion ofan underpayment oftax attributable to negligence or disregard of rules and regulations or a substantial understatement ofincome tax. The accuracy- related penalty does not apply to any portion ofan underpayment for which a taxpayerhad reasonable cause and acted in good faith.

6662 accuracy-relatedpenalty for a substantial understatement ofincome tax does not apply, since Ps' deductions ofthe inputs under I.R.C.

Section 6662 Penalties A. Overview Section 6662(a) and (b)(1) and (2) imposes a 20% accuracy-relatedpenalty on the portion ofan underpayment oftax attributable to negligence or disregard of rules and regulations or a substantial understatement ofincome tax. The accuracy- related penalty does not apply to any portion ofan underpayment for which a taxpayerhad reasonable cause and acted in good faith.

6211, 6662(d)(2), 6664(a). That being so, it is petitioners' burden to establish that the imposition ofthe penalty is not appropriate. See Higbee v. Commissioner, 116 T.C. 438, 447 (2001); see also Rule 142(a); Welch v. Helvering, 290 U.S. at 115. Section 6664(c)(1) provides that the section 6662(a) accuracy-related penalty does not apply to any portion ofan underpayment ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the unde

6662(d); sec. 1.6662-4(b), Income Tax Regs. The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofan underpayment ifthe taxpayerproves that there was reasonable cause for such portion and that he acted in good faith with respect thereto.

-89- The section 6662 penalty does not apply to any portion ofan underpayment "ifit is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to * * * [it]." Sec.

6662(c). The Commissioner bears the burden ofproduction with respect to a section 6662 penalty. Sec. 7491(c). Respondent met his burden ofproduction by showing that petitioners were not entitled to $5,200 ofthe $6,000 deduction claimed on their 2010 return. The burden thus shifts to petitioners to prove that the penalty does not apply.

Pursuant to section 6664(c)(1), the accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment for which a taxpayer establishes that he or she: (1) had reasonable cause and (2) acted in good faith.

6662(h) 40% penalties was improper because R did not make an "initial determination" regarding the penalties pursuant to I.R.C. sec. 6751(b). R contends that I.R.C. sec. 6751(b) does not apply in deficiency proceedings or, alternatively, that R satisfied the procedural requirements ofI.R.C.

We are confident that the Court ofAppeals for the Fifth Circuit would find these cases governed by the reasoning and result ofLemay and Bujol and factually distinguishable from Jones.

6662(d)(2)(A). An understatement is substantial ifthe amount ofthe understatement for the taxable year exceeds the greater of 10 percent ofthe amount oftax required to be shown in the tax return for the taxable year or $5,000. Sec. 6662(d)(1)(A). The accuracy-relatedpenalty under section 6662(a) does not apply to any portion ofan underpayment ifit is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, such portion.

We are confident that the Court ofAppeals for the Fifth Circuit would find these cases governed by the reasoning and result ofLemay and Bujol and factually distinguishable from Jones.

The section 6662 accuracy-relatedpenalty does not apply with respect to any portion ofan underpayment "ifit is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to * * * [it]." Sec.

376, 395-396 (2013), the accuracy-relatedpenalty under section 6662(a) does not apply.

Section 6664(c)(1) provides that the section 6662(a) accuracy-related penalty does not apply to any portion ofan underpayment ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to, the underpayment.

The section 6662 penalty does not apply to any portion ofan underpayment "ifit is shown that there was a reasonable cause for such portion and that the tax- payer acted in good faith with respect to * * * [it]." Sec.

6662(a), (b)(1). "Negligence" is defined as "any failure to make a reasonable attempt to comply with the provisions of* * * [the Code]." Sec. 6662(c). The Commissioner bears the burden ofproduction with respect to this penalty. Sec. 7491(c). Once the Commissioner satisfies his burden, the burden shifts to the taxpayerto prove that the penalty does not apply.

6662(d)(2)(B). Fargo and King argue that the accuracy-relatedpenalty does not apply because they meet the reasonable cause defense ofsection 6664(c)(1).

6662(a), (b)(1). "Negligence" is defined as "any failure to make a reasonable attempt to comply with the provisions of* * * [the Code]." Sec. 6662(c). The Commissioner bears the burden ofproduction with respect to this penalty. Sec. 7491(c). Once the Commissioner satisfies his burden, the burden shifts to the taxpayerto prove that the penalty does not apply.

6662(d)(2)(B). Fargo and King argue that the accuracy-relatedpenalty does not apply because they meet the reasonable cause defense ofsection 6664(c)(1).

The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofan underpaymentwhere the taxpayer shows thatthere was reasonable cause and that he/she acted in good faith with respect to that portion.

6662(e)(2). Generally, the accuracy-relatedpenalty does not apply with respect to any portion ofthe underpayment for which the taxpayer shows that there was reasonable cause and that he or she acted in good faith.

Pursuant to section 6664(c)(1), an accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment for which a taxpayer establishes that he had reasonable cause and acted in good faith.

The section 6662 penalty does not apply to any portion ofan underpayment "ifit is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to * * * [it]." Sec.

The section 6662(a) accuracy-related penalty does not apply to any portion ofthe underpayment as to which the taxpayers establish,that they acted with reasonable cause and in good faith.

New matterrelating to liability forpenalty The Commissioner acknowledges that, unlike the additions to tax for failure to file timely under section 6651(a)(1),32 the section 6662(a) accuracy-related 3'The language quoted above from the notice ofdeficiency issued to Mrs.

Accordingly, we conclude that the section 6662(h) gross valuation misstatement does not apply.39 38Representatives from the city ofDenver testified that the city highly valued the preservation ofboth the interior and exterior ofthe El Jebel Shrine.

6662(h). On brief, however, the Commissioner concedes that the 40% gross valuation misstatement penalty does not apply; and he asserts instead that the underpayment is attributable to a substantial valuation understatementunder section 6662(b)(5) and (g), thus incurring a 20% penalty.

6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. A "substantial understatement" includes an understatement ofincome taxthat exceedsthe greater of 10% ofthe tax required to be shown on the return or $5,000. See sec. 6662(d); sec. 1.6662-4(b), Income Tax Regs. The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofan underpaymentifthe taxpayerproves thatthere was reasonable cause for such portion and that he acted in good faith with respect thereto.

6662(d)(2)(A). An understatement is substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year exceeds the greater of 10 percent ofthe tax required to be shown in the tax return for that year or $5,000. Sec. 6662(d)(1)(A). The accuracy-relatedpenalty under section 6662(a) does not apply to any portion ofan underpayment ifit is shownthat there was reasonable cause for, and that the taxpayer acted in good faith with respect to, such portion.

New matterrelating to liability forpenalty The Commissioner acknowledges that, unlike the additions to tax for failure to file timely under section 6651(a)(1),32 the section 6662(a) accuracy-related 3'The language quoted above from the notice ofdeficiency issued to Mrs.

- 19 - The section 6662(a) accuracy-related penalty does not apply with respect to any portion ofan underpayment ifthe taxpayerproves that there was reasonable cause for such portion and that he acted in good faith with respect thereto.

Therefore, the Court need not address whetherthe estate is liable for the substantial estate tax valuation understatementpenalty under section 6662(g) or (h) for the STN.Com stock. An accuracy-relatedpenalty under section 6662 may still be applicable to other items found in the stipulation ofsettled issues and from parties' concessions. Further, section 6662(c) is inapplicable because there was not an underpayment oftax shown on the original Form 706 from the STN.Com stock.

1.6662-3(b)(1), Income Tax Regs. The Commissionerbears the burden ofproductionwith respect to the section 6662 penalty. Sec. 7491(c). Generally, this means that the Commissioner must come forward with sufficient evidence indicating that it is appropriate to impose the relevantpenalty. Once the Commissioner has done so, the burden of proofis on the taxpayer to show that the penalty does not apply.

Respondent also determined that petitioner is liable for an accuracy-related penalty pursuant to section 6662. Respondent bears the burden ofproduction with respect to this penalty. See sec. 7491(c). To meet this burden, respondent must produce evidence establishing that it is appropriate to impose this penalty. Once respondent has done so, the burden ofproofis on petitioner to show that the penalty does not apply.

Reasonable Cause and Good Faith The section 6662(a) accuracy-related penalty does not apply to any portion ofthe underpayment as to which the taxpayers establish that they acted with reasonable cause and in good faith.

Sec 6662(d)(2)(A). An understateñ1ent ofincome tax is substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year exceeds the greater of 10% ofthe-tax required to e shown on the return or $5,000. Sec. 6662(d)(1)(A). The accuracy-relatedpenalty does not apply with respect to any portion of the underpayment for,which the taxpayer shows that there was reasonable cause and that he or she acted in good faith..

6211, 6662(d)(2), 6664(a). That being so, it is petitioners' burden to establish that the imposition ofthe penalty is not appropriate. See Higbee v. Commissioner, 116 T.C. 438, 447 (2001); see also Rule 142(a}; Welch v. Helvering, 290 U.S. 111, 115 (1933). Section 6664(c)(1) provides that the section 6662(a) accuracy-related penalty does not apply to any portion ofan underpayment ifthe taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with respect to,

6662(d)(1)(A). The accuracy-relatedpenalty does not apply with respect to any portion of the underpayment for which the taxpayer shows that there was reasonable cause and that the taxpayer acted in good faith.; Sec.

- 16 - [*16] The section 6662(a) accuracy-relatedpenalty does not apply with respect to any portion ofthe underpayment for which it is shown that the taxpayerhad reasonable cause and acted in good faith.' Sec.

6662(h)(2)(A). Ifthe value or adjusted basis ofthe property is determined to be zero, the gross value misstatementpenalty is applicable. Sec. 1.6662-5(g), Income Tax Regs. In the Court ofAppeals for the Second Circuit, a gross valuation misstatement exists and thus the 400% penalty applies where a claimed tax benefit is disallowed for lack ofeconomic substance. Gilman v. Commissioner, 933 F.2d at 150-152. An accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayme

imed Schedule E deductions to which they were not entitled, having failed to report any income from the purported rental payments, and that petitioners claimed as a dependenttheir married daughter ho had filed ajoint return with her husband, respondent has met his burden ofproduction on the section 6662(a) penalty.7 The accuracy-relatedpenalty does not apply with respect to any portion of the underpayment ifit is shown tlfat the taxpayerhad reasonable cause and acted in good faith.

6662(d)(2)(B)(i), 6664(c)(1). We are unpersuaded that petitioner meets the requirements for either defense. Under section 6662(d)(2)(B)(i), an accuracy-relatedpenalty does not apply to the portion ofan understatement ifthe taxpayer's position with respect to such portion is supported by substantial authority.

1.6662-3(b)(1), Income Tax Regs. The section-6662(a) accuracy-relatedpenalty does not apply to any portion ofan underpaymentwith respect to which the taxpayerhad reasonable cause and acted in good faith.

Respondent argues that Bauer is inapposite.

6662(h)(2)." Petitioner reported the value ofthe second conservation easement to be $1,049,850 on his 2003 income tax return. This amount exceeds 400% ofthe value (i.e., $128,000) now asserted by respondent. Pursuant to section 6664(c)(2) the gross valuation misstatementpenalty does not apply if(A) the claimed value ofthe property was based on a "qualified appraisal" made by a "qualified appraiser" and (B) in addition to obtaining such an appraisal, the taxpayermade a good-faith investigation of

Pursuant to section 6664(c)(1), the accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment for which a taxpayer establishes that he or she: (1) had reasonable cause, and (2) acted in good fàith.

The Commissioner bears the burden ofproduction with - 17 - respect to a section 6662 penalty. Sec. 7491(c). Once the Commissioner satisfies his burden, the burden shifts to the taxpayerto prove that the penalty does not apply.

Pursuant to section 6664(c)(1), an accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment for which a taxpayer establishes that he or she: (1) had reasonable cause and (2) acted in good faith.

Respondent bears the búrden ofproduction, but petitioner bears - 8 - [*8] the burden ofproof, with respect to the addition to tax under section 6651 and any accuracy-related penalty under section 6662. See sec. 7491(c). II. Section 166 bad debt deduction A. Bona fidé debt Section 166(a)(1) allows as a deduction any bona fide debt that becomes worthless within the taxable year. For nonbusiness bad debt held by a taxpayer other than a corporation, section 166(a)(1) does not apply, and the taxpaye

The Court acknowledges that petitioners present well-thought-out arguments attempting to distinguish their circumstances from those in previous cases. However, the failure to timely file demonstrates that they did not act in good faith or with reasonable cause while advancing their positions. Consequently, Zvieifel is liable for accuracy-related penalties under section 6662(a) for taxable y¢ars 2001 through 2006, and Crews is liable for accuracy-relatedpenalties under section 6662(a) for taxable

Petitioners suggest that these cases are distinguishable from the Cole cases. The most obvious distinction is that Scott C. Cole and his brother and law partner Darren T. Cole were penalized under section 6663 for fraud in their cases, whereas only the accuracy-related penalty of section 6662 is disputed in these cases.

Petitioners suggest that these cases are distinguishable from the Cole cases. The most obvious distinction is that Scott C. Cole and his brother and law partner Darren T. Cole were penalized under section 6663 for fraud in their cases, whereas only the accuracy-related penalty of section 6662 is disputed in these cases.

Petitioners suggest that these cases are distinguishable from the Cole cases. The most obvious distinction is that Scott C. Cole and his brother and law partner Darren T. Cole were penalized under section 6663 for fraud in their cases, whereas only the accuracy-related penalty of section 6662 is disputed in these cases.

Because the reasonable cause and good faith exception is a defense to both negligence and a substantial understatement of income tax, the section 6662 penalty does not apply.

Petitioners suggest that these cases are distinguishable from the Cole cases. The most obvious distinction is that Scott C. Cole and his brother and law partner Darren T. Cole were penalized under section 6663 for fraud in their cases, whereas only the accuracy-related penalty of section 6662 is disputed in these cases.

1.6662-4(g)(4)(i), Income Tax Regs. In the case ofa substantial or gross valuation misstatementwith respect to charitable deduction property, however, the reasonable-cause-and-good-faith exception does not apply unless the taxpayer can show that (1) "the claimed value of the property was based on a qualified appraisal made by a qualified appraiser", sec.

Unlike the facilities support deduction, these items are not attributable to the facilities support arrangements between SGR and the Roth IRA corporations. Similarly, the disallowance ofthe medical expense reimbursementdeductions and the officer compensation expènse deductions relating to Mrs. Repetto's salary is attributable to Yolo's claiming improper deductions, not to petitioners' participation in a listed transaction. We expect respondentto adjust his calculations ofthe section 6662Apenalti

6662(a) and (b) (1). The penalty increases to a 40-percent. rate to the extent that the underpayment is attributable. to a.gross valuation misstatement. Sec. 6662(h) (1). Ma accuracy-related penalty under section 6662 does not apply to, any portion of an underpayment of tax for which a taxpayer had reasonable cause and acted in good faith..

6662(d)(1)(A). . The accuracy-relatedpenalty under section 6662(a) does not apply to any portion ofan underpayment ifit is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, such portion.

Pursuantto that section, accuracy-relatedpenalties under section 6662 do not apply to any portion ofan underpayment for which a taxpayerestablishes that he or she: (1) had reasonable cause; and (2) acted in good faith. The reasonable cause exception does not apply, however, in the case ofa substantial or gross valuation overstatementwith respect to property for which a charitable contribution deduction was claimed under section 170 unless the claimed value ofthe property was based on a "qualifie

1.6662-3(b)(1), Income Tax Regs. The section 6662(a) accuracy-related penalty does not apply where the taxpayer shows that he acted in good faith and with reasonable cause.

Petitioners suggest that these cases are distinguishable from the Cole cases. The most obvious distinction is that Scott C. Cole and his brother and law partner Darren T. Cole were penalized under section 6663 for fraud in their cases, whereas only the accuracy-related penalty of section 6662 is disputed in these cases.

Petitioners suggest that these cases are distinguishable from the Cole cases. The most obvious distinction is that Scott C. Cole and his brother and law partner Darren T. Cole were penalized under section 6663 for fraud in their cases, whereas only the accuracy-related penalty of section 6662 is disputed in these cases.

6662(a) and (b)(1), (2) and (3). The penalty increases to a 40% rate to the extent that the underpaymentis attributable to a gross valuation misstatement. Sec. 6662(h)(1). An accuracy-related penalty under section 6662 does not apply to any portion ofan underpayment oftax for which a taxpayer had reasonable cause and acted in good faith.

6662(d)(2)(B). Considering the facts and law, we find that neither ofthese reductions applies in this case 9 Pursuantto section 6664 c)(1), the accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment for which a taxpayer establishes that he or she: (1) ad reasonable cause; and (2) acted in good faith.

Petitioners suggest that these cases are distinguishable from the Cole cases. The most obvious distinction is that Scott C. Cole and his brother and law partner Darren T. Cole were penalized under section 6663 for fraud in their cases, whereas only the accuracy-related penalty of section 6662 is disputed in these cases.

Petitioners suggest that these cases are distinguishable from the Cole cases. The most obvious distinction is that Scott C. Cole and his brother and law partner Darren T. Cole were penalized under section 6663 for fraud in their cases, whereas only the accuracy-related penalty of section 6662 is disputed in these cases.

Pursuant to section 6664(c)(1), the accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment for which a taxpayer establishes that he or she: (1) had reasonable cause; and.(2) acted in good faith.

The section 6662(a) accuracy-related penalty does not apply to any portion of an underpayment of tax if the taxpayer shows reasonable cause for, and the taxpayer acted in good faith with respect to, that portion.

Crouse for their taxable year 2001 for the addition to tax under section 6651(a) (1) and the accuracy-rel-ated penalty under section 6662 (a). Section 6651(a) (1) imposes an addition to tax -for failure to file timely a return.22 The addition to tax under section 6651(a) (1) does not apply if the failure to file timely is due to reasonable cause, and not to willful neglect.

Pursuant to that section, the 20-percent accuracy- related penalty of section 6662(a) does not apply to any portion of an underpayment for which petitioner establishes that LLC, through Mr.

6662(d) (1) (A). 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, and that the taxpayer acted in good faith with respect to, such portion.

- 18 - provided in section 6662 (b) (2). Negligence includes any failure I to make a reasonable attempt to comply with dhe "provisions of the Internal Revenue Code. Sec. 6662(c). Negli ence also includes any failure by the taxpayer to keep adequate books and records or to substantiate items properly. Sec. 1.6662-Ì3(b) (1), Income Tax Regs. The term ''disregard" includes any careless, reckless or intentional disregard. Sec 6662(c). The section 6662(a) accuracy-related penialty does not apply wher

- 18 - evidence to refute the Commissioner's evidence shifts to the taxpayer arid the taxpayer must prove that the section 6662 penalty does not apply.

Section 6_6_62 Accuracy-Related Penalty Respondent determined in the FPAA that Historic Boardwalk Hall should be liable for the accuracy-related penalty pursuant to section 6662. Because we find respondent's other determinations to be incorrect, the section 6662 penalty is inapplicable .

Section 6662(h) (1) increases the 20-percent rate to a 40-percent rate to the extent that the underpayment is attributable to a gross valuation misstatement. Sec. 6662(h) (1). An accuracy-related penalty under section 6662 does not apply to any portion of an underpaynent of tax for which a taxpayer had reasonable cause and acted in good faith.

6662(a), (b) (2); sec. 1.6662-2(a) (2), Income Tax Regs. The accuracy- related penalty does not apply, however, to any portion of an underpayment for which there was reasonable cause and with respect to which the taxpayer acted in good faith.

that has a measurable useful life is distinguishable from residual goodwill and may be amortized over its useful life .

The cases petitioners cite are materially distinguishable . We therefore conclude that petitioners did not have substantia l authority for their tax treatment of ResEnt and R & L Air . I The accuracy-related penalty under section 6662(a) is not imposed with respect to any portion~of the underpayment as t o which the taxpayer acted with reasonable cause and in good faith .

Furthermore, as, discussed above, the cases petitioners cite are materially distinguishable . Other than vague arguments from congressional ' intent, petitioners have been unable to provide any authority recognized under section 1 .6662-4(d)(3)(iii), Income Tax Regs .

6662(a) does not apply to any portion of an underpayment if the taxpayer proves that there was reasonable cause for his or her position and that he or she acted in good faith with respect to such portion.

6662(d)(2)(A), and - 36 - an understatement will be treated as substantial in the case of an individual if it exceeds the greater of $5,000 or 10 percent of the tax required to be shown on the return, sec : 6662 (d) (1) (A) 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, and that the taxpayer acted in good faith with respect to, such portion.

2009-265, but those cases are distinguishable . Petitioner has asserted partner- level defenses to the sec . 6662 accuracy-related penalty that depend on factual findings at the partner level .

If, as appears likely, their understatement of income tax as calculated under Rule 155 exceeds the greater of $5,000 or 10 percent of the tax required to be - 42 - shown on their 2001 return, the Commissioner has succeeded in defending the section 6662 penalty on this alternative ground. The accuracy-related penalty does not apply if the taxpayer had reasonable cause and acted in good faith, sec.

6662 (d) (1) (A) . The section 6662 accuracy-related penalty-does not apply where the taxpayer shows that he or she acted in good faith and exercised reasonable cause .

Because the tax deficiency for each year that we sustain herein exceeds $5,000, the section 6662(a) and (b) (2) substantial understatement penalty would appear to be triggered. Under section 6664(c), however, the above penalty does not apply to any portion of an underpayment for a year if a taxpayer had reasonable cause for such portion of the underpayment and if the taxpayer acted in good faith with regard thereto.

6662(d) (1) (A).. - The section 6662 accuracy-related penalty does not apply where the taxpayer shows that he acted in good faith and with reasonable cause.

The accuracy-related penalty under'section 6662'(a) does not apply to any portion of an underpayment if it is shown that there 'The record is unclear as to whether there was more than one Form 1099 issued to petitioner .

The accuracy-related penalty under section 6662(a) does not apply, however, to any portion of an underpayment if a taxpayer shows that there was reasonable cause for, and that the taxpayer acted.

Accordingly, we find it premature to rule at this time that the valuation misstatement penalty under section 6662(h) does not apply .

6662 (c) ; sec . 1 .6662 - 3(b)(2), Income Tax Regs . The accuracy- related penalty of section 6662 ., does not apply with respect to any portion of an underpayment if it is shown that there was reasonable cause for .such portion and that the taxpayer acted in good faith with respect to such portion .

.) - 6 - as defined in section 6662(d)(2)(c)(iii) * * * and the documents withheld by Petitioners are in connection with the promotion of the participation of Petitioners' corporate general partners in the transactions . Petitioners argue that the section 7525(b) exception does not apply because respondent has failed to provide evidence of several elements necessary to that provision's application : viz, (1) the promotion of (2) a corporation's participation in (3) any tax shelter , and, in the

- 20 - Section 6664(c)(1) provides that the section 6662 penalty does not apply to any portion of an underpayment if reasonable cause existed and the taxpayers acted in good faith .

6662 ( c) ; sec. 1 .6662-3 (b)(1), Income Tax Regs . But the section 6662(a) per does not apply to any portion of an underpayment of tax if ii is shown that there was reasonable cause for the'taxpayer',s(cid:127)positio n and that the taxpayer acted in good fai h with respect to th a portion .

Section 6664(c) Reasonable Cause Exception The accuracy-related penalty imposed under section 6662 does not apply with respect to any portion of an underpayment as to, which the taxpayer can demonstrate reasonable cause and good faith.

In an entry dated December 13, 2001, the examining agent's manager apparentl y noted: "Concur - no fraud penalty or section 6662 penalty due to F8082 disclosure . No penalties apply ." (Emphasis added.) The reason that the examination personnel of the IRS asserted against Mr.. Burke no fraud penalty under section 6663(a) and no accuracy- related penalty under section 6662 was stated in that entry-- i .e ., "F8082 disclosure"--and that reason does not apply to the failure-to-pay addition .

Section 6662(a) and (b)(1) . imposes a 20-percent penalty on an unde payment of tax that results from negligence or disregard of rules or regulations . Section 6662(c) defines the term "negli ence" to include "any failure to make a reasonable attempt to comply with the provisions of this title", .and the term "disregard" to include "any careless, reckless, or intentional disregard . " The section 6662 penalty is inapplicable to the extent the taxpayer had reasonable cause for the underpayment an

- 20 - Section 6664(c)(1) provides that the section 6662 penalty does not apply to any portion of an underpayment if reasonable cause existed and the taxpayers acted in good faith .

- 16 - to tax at issue in this case were not imposed pursuant to section 6662 and relate to petitioners' 1983, 1984, and 1985 joint Federal income tax returns, which were due to be filed long before section 6662 took effect . Simply stated, the regulatio n cited by petitioners is inapplicable here .

- 19 - The section 6662 penalty is inapplicable to the extent the taxpayer had reasonable cause for the understatement and acted in good faith .

6662(c) . 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, and that the taxpayer acted in good faith with respect to, such portion.

7491(c) with respect to the accuracy- related penalty under section 6662(a) determined in the notice of deficiency because the underpayment of tax exceeds $5,000 . The accuracy-related penalty does not apply to any part of an underpayment of tax if it is shown the taxpayer acted with reasonable cause and in good faith .

6662(d)(1)(A) . 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, and that the taxpayer acted in good faith with respect to, such portion .

Addition to Tax Under Section 6651(a)(1) and Accuracy-Related Penalty Under Section 6662(a ) Respondent determined that petitioner is liable for the addition to tax under section 6651(a)(1) and the accuracy-related penalty under section 6662(a) . Section 6651(a)(1) imposes an addition to tax for failure to file timely a tax return . The addition to tax under that section does not apply if the failure to file timely is due to reasonable cause, and not willful neglect .

6662(d)(1). Section 7491(c) requires the Commissioner to carry the burden of production with regard to penalties. Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Once the burden of production is met, the taxpayer must come forward with sufficient evidence that the penalty does not apply.

- 8 - The accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment, however, if it is shown that there was reasonable cause for the taxpayer's position and that the taxpayer acted in good faith.

- 11 - The accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment, however, if it is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, that portion.

- 13 - The accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment, however, if it is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, that portion.

Accuracy-related Penalty Under Section 6662 Section 6662(a) provides that a taxpayer may be liable for a penalty of 20 percent of the portion of an underpayment of tax attributable to (1) a substantial understatement of tax or (2) negligence or disregard of rules or regulations. Sec. 6662(a) and (b)(1) and (2). The accuracy-related penalty does not apply to any portion of an underpayment of tax if it is shown that there was reasonable cause for such portion and that the taxpayer acted in good fa

6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. “Disregard” includes any careless, reckless, or intentional disregard. Sec. 6662(c). The accuracy-related penalty does not apply to any portion of an underpayment of tax if it is shown that there was reasonable cause for such portion and that the taxpayer acted in good faith.

Negligence Penalties Finally, we turn to the section 6662(a) accuracy-related penalties. This Court has held that: it is an abuse of discretion to deny relief under section 6015(f) in an addition to tax or penalty situation when on an individual basis the putative innocent spouse meets the statutory standard generally applied to all taxpayers that shows the addition to tax or penalty is inapplicable.

As to her personal physical injury, Dobbs compensated petitioner in a separate workmen’s compensation claim brought by her, and we decline to follow petitioner’s tenuous nexus between the discrimination and the personal injury.

3 Unlike the computation of a deficiency under sec. 6211 or the computation of an understatement for purposes of sec. 6694, the earned income credit claimed on petitioners’ 1997 return (and disallowed in the notice of deficiency) is not taken into account in the computation of the understatement of income tax for purposes of sec. 6662.

Finally, we address the accuracy-related penalty imposed pursuant to section 6662(a). Section 6662(a) and (b)(1) imposes a penalty on any portion of an underpayment that is attributable to negligence or disregard of rules or regulations. The term “negligence” includes any failure to make a reasonable attempt to comply with the statute, and the term “disregard” includes any careless, reckless, or intentional disregard. Sec. 6662(c). The penalty does not apply to any portion of an underpayment for

Section 6662(a) imposes an accuracy-related penalty equal to 20 percent of the underpayment of tax resulting from, inter alia, a substantial understatement of income tax, see section 6662(b)(2), or negligence or disregard of rules or regulations, - 34 - see section 6662(b)(1). 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, and that the taxpayer acted in good faith with respect to, such porti

- 12 - Pursuant to section 6664(c)(1), a section 6662 penalty does not apply to any portion of an underpayment if reasonable cause existed and the taxpayers acted in good faith.

We accept this stipulation and accordingly need not decide the issue.

We need not decide here whether the “value” Seabrook claimed on its return for purposes of applying section 6662(h) is $35,850,000 or $32,581,443, as either amount far exceeds the statutory threshold for the gross valuation misstatement penalty.

Although on the facts before us we have serious reservations about whether bona fide partnerships existed before the purchases made by the InvestCos in November 2015, in view of our disposition on the qualified appraisals issue, we need not resolve the bona fide partnership issues or the inventory issues and attendant income tax consequences.

We accept this stipulation and accordingly need not decide the issue.

Consequently, respondent concludes, "petitioners could not have reasonably relied upon their tax return preparers for taxable years 2009 through 2014, inclusive, and -58- [*58] they failed to establish that they acted with reasonable cause and good faith." We need not decide whether petitioners' reasonably relied on their return preparers because we conclude that respondent failed to meet the burden of production imposed on him by section 7491(c).

trade or business) and (2) whether, to the extent GMM is subject to tax, GMM is liable for additions to tax under section 6651(a)(1) and (2) and for a penalty pursuant to section 6662(a) (we hold that GMM is not liable for any additions to tax or penalty).2 2We need not decide the effect ofthe U.S.-Greece tax treaty--Convention for the Avoidance ofDouble Taxation and the Prevention ofFiscal Evasion with respect to Taxes on Income, Greece-U.S., February 20, 1950, T.I.A.S.

However, because our conclusions are based on the preponderance ofevidence, we need not decide whether petitioners or respondent bears the burden ofproof.

However, because our conclusions are based on the preponderance ofevidence, we need not decide whether petitioners or respondent bears the burden ofproof.

Because there are substantial understatements for 2007 and 2008, the Court need not decide whether the underpayments are due to negligence.

Respondent showed that the understatement exceeds 10% ofthe tax required to be shown on the return, which is greater than $5,000, and we therefore need not decide whetherpetitioners were negligent or disregarded rules or regulations.

Because petitioner cannot show the worthlessness ofthe Landmark note, we need not decide whether it was a nonbusiness debt as defined in section 166(d)(2).

Ifsection 1034 doesn't save Gaggero from a deficiency for 1997, we then need to determine whether he is liable for an accuracy-related penalty under section 6662.5 5 Because we depide this case on a preponderance ofthe evidence, we need not decide whether the burden ofproofshifts to the Commissioner under section 7491.

Because we find that petitioners substantially understated their Federal income tax for 2006 and 2007, we need not decide whether petitioners' underpayments are attributable to negligence or disregard of rules or regulations.

Because we find that petitioners substantially understated their Federal income tax for 2006 and 2007, we need not decide whether petitioners' underpayments are attributable to negligence or disregard of rules or regulations.

* * * We need not decide, therefore, whether the .terms of the agreement fixed a portion of the payments as child support nondeductible under section 71(a) and (c) .

We are not convinced that petitioner provided more than half of Shanita’s support.

We disagree with respondent and find that New Shoals satisfied the substantive and reporting requirements for a noncash charitable contribution deduction.

We disagree with any implication, however, that this body of law supports an interpretation of the phrase "tax required to be shown on a return" contrary to that which we espouse.

Rather, they challenged the penalties for the first time in their answering brief, in defiance of the Court’s in- structions that answering briefs were to contain no legal argument but were to be confined to rebutting the other side’s proposed findings of fact.

Thus, the section 6676 penalty covers more taxpayer submissions to the IRS than the section 6662 and 6663 penalties, which are confined to returns.

We hold that they are.

As an alternative position, the Notice of 6 [*6] Deficiency determined accuracy-related penalties pursuant to section 6662(a) for tax years 2006, 2007, 2008, 2009, and 2010.

For the same reasons, we hold that this Court has jurisdiction to consider the imposition of additions to tax for failure to file under section 6651(a)(1), fraudulent failure to file under section 6651(f), failure to pay under section 6651(a)(2), and failure to make estimated tax payments under section 6654(a).

Because we hold Paul-Adams is entitled to a deduction for the correct value of the conservation easement donation, there is no underpayment not attributable to a valuation misstatement, and we need not address the alternative penalties.

We hold that they are.

We hold they did; 2.

The opinion letter represented that no penalty should apply to the transaction pursuant to section 6662(b)(2) or (3).

Asmat is not liable for the section 6663 civil fraud penalties for the tax years at issue, but it stated that she is liable for the negligence penalties pursuant to section 6662(a) and (c).

We hold that the Partnerships have satisfied the requirements of section 170.

We hold in the alternative, and to the extent that the understatement for any partner attributable to the other deductions is small enough that it does not count as “substantial,” that the underpayment is attributable to negligence.

We hold that Oconee is entitled to a charitable contribution de- duction of zero for 2015, for two independently sufficient reasons.

The notices of deficiency stated that the IRS determined a deficiency in tax of $7,918 and proposed a substantial understatement accuracy-related penalty, pursuant to section 6662(d), of $1,584.

s a result of the adjustments to the incomes of Cedar Valley Bird and TARD Properties, which flowed through to petitioners, respondent determined a deficiency of $166,474 for petitioners’ 2005 tax year, an addition to tax pursuant to section 6651(a)(1) of $41,618.50, and an accuracy-related penalty pursuant to section 6662 of $33,294.80.

Conclusion For the foregoing reasons, we hold (1) that petitioners are not entitled to a section 41 research credit and (2) that petitioners are liable for section 6662(a) penalties.

We hold (1) that Murfam did not satisfy the reporting requirements of section 170(f)(11), but that its failure to do so was for reasonable cause; (2) that the value of the easement donated by Murfam was $5,637,207 (i.e., about $107,000 less than Murfam claimed on its return); and (3) that reasonable cause

As petitioner reported income tax of $10,719 and $12,716 for those years, respectively, respondent determined that petitioner is liable for a penalty for each year pursuant to section 6662(a) and (b)(2)1 for an underpayment attributable to a substantial understatement of income tax.

We hold that petitioners did not satisfy the reporting requirements of section 170(f)(11) but that their failure to do so was for reasonable cause.

We hold (1) that the appraisal attached to Mill Road 36’s tax return is a qualified appraisal by a qualified appraiser; (2) that the easement donated on the Mill Road Tract is a qualified conservation contribution under section 170(h); (3) that the value of the easement donated by Mill Road 36 was $900,000

For 2009 we hold that the Conrads are entitled to (1) $61,983 of mortgage interest and real estate taxes as itemized deductions; (2) $100,448 of their residence expenses as rental-property deductions; and (3) $3,885 of their residence expenses as a business-use-of-home deduction on Mrs.

In the notice issued to petitioners, respondent determined the following deficiencies and accuracy-related penalties pursuant to section 6662(a) for the years in issue: Year Deficiency I.R.C.

In light of these considerations, taking into account all of the facts and circumstances, we hold that Mr.

Ibrahim, is liable for a federal income tax deficiency of $15,786 and an accuracy-related penalty pursuant to section 6662(a) of $3,157 for the 2017 tax year.

McMorise made the initial determination to assert petitioner’s liability for a substantial understatement penalty pursuant to section 6662(d) for the year in issue and prepared a “Penalty Substantial Understatement Lead Sheet” (penalty lead sheet) documenting that determination.

We hold that the Lamprechts are liable for the section 6662 accuracy-related penalties for 2006 and 2007 as determined by the Commissioner, and that assessment of the penalties is not barred by the statute of limitations.

Discussion Pursuant to section 6662(a), the Commissioner may impose an accuracy-related penalty on any portion of an underpayment of tax required to be shown on a return if the underpayment is attributable, inter alia, to a “substantial understatement of income tax.” § 6662(a), (b)(2), (d).

MEMORANDUM FINDINGS OF FACT AND OPINION KERRIGAN, Judge: Respondent determined deficiencies of $2,020,083 and $960,655 and penalties pursuant to section 6662(a) of $404,017 and $192,131 for 2011 and 2012 (years at issue), respectively.

(Purple Heart): (1) was entitled to offset its gross receipts with any cost of goods sold (COGS), (2) underreported its gross income, and (3) is liable for the accuracy-related penalty pursuant to section 6662(a).2 1(...continued) Revenue Code as in effect at all relevant times and all Rule references are to the Tax Court Rules of Practice and Procedure.

Penalties Respondent determined that petitioner is liable for penalties for failure to deposit tax pursuant to section 6656 and accuracy-related penalties pursuant to section 6662(a) for all periods in issue.

Additionally, section 6662 provides for several distinct penalties, and each specific penalty determined thereunder must be approved by a supervisor.

Conclusion We hold that the Warques are not entitled to deduct their reported unreimbursed employee business expenses for their 2015, 2016, and 2017 taxable years.

We hold they may deduct those expenses to the extent stated below.

We hold that the basis adjustments must be made for 2012.

- 4 - [*4] (6) whether the Larkins are liable for accuracy-relatedpenalties pursuant to section 6662(a) for the years at issue (we hold that they are not liable for 2008 but that they are liable for 2009 and 2010).

We hold that the IRS properly disallowed the deduction in full because the conservation purpose underlying the easements was not "protected in perpetuity" as required by section 170(h)(5)(A).

Conclusion In sum, we hold that Mr.

Because we hold that timely ap- proval was not secured for any penalty, we need not address petitioner's concerns.

ined a $9,210 deficiency in Federal income tax, a $1,744.50 addition to tax for late filing under section 6651(a)(1),¹ and a $1,566.80 penalty ¹Unless otherwise indicated, all section references are to the Internal (continued...) SERVED Jun 16 2020 - 2 - [*2] for a substantial understatement oftax pursuant to section 6662(b)(2) and (d).

The parties did not address the burden ofproofas to the alternative penalties, but since we hold that the Emanouils do not owe the deficiencies, we need not address that question.

In addition--but most relevant to the return for 2011 (since the 2011 understatement may not be "substantial")--we hold that Ms.

We hold he did meet the requirements.

MEMORANDUM FINDINGS OF FACT AND OPINION ASHFORD, Judge: By statutorynotice ofdeficiency dated September 12, 2012, respondent determined a deficiency in petitioners' Federal income tax of SERVED Apr 07 2020 - 2 - [*2] $286,949 and accuracy-relatedpenalties pursuant to section 6662(a) and (h)¹ of$45,935 and $22,910, respectively, for the 2008 taxable year.

Accordingly, we hold that petitioners Wegbreit are liable for the section 6663(a) fraud penalty on the underpayment oftax required to be shown on theirjoint Form 1040 for each year 2005 through 2009.

We hold that the notice ofdeficiency is valid and that we havejurisdiction.

Accordingly, we hold that petitioners Wegbreit are liable for the section 6663(a) fraud penalty on the underpayment oftax required to be shown on theirjoint Form 1040 for each year 2005 through 2009.

(PTI), for 2010, and a net operating loss carryforward deduction for 2010 or 2012; we hold that they are not except to the extent stated herein; (2) whether Sterling Ridge, Inc.

Upon review ofpetitioner's so-called noncompete clauses, however, we conclude that for the most part they do not prevent petitioner from contracting with others; they merely require that the contracted work be completed - 23 - [*23] first." Consequently, we hold that petitioner may not exclude any amount from her trade or business income that she alleges is from noncompete clauses.

(PTI), for 2010, and a net operating loss carryforward deduction for 2010 or 2012; we hold that they are not except to the extent stated herein; (2) whether Sterling Ridge, Inc.

(PTI), for 2010, and a net operating loss carryforward deduction for 2010 or 2012; we hold that they are not except to the extent stated herein; (2) whether Sterling Ridge, Inc.

(SRI); we hold that they do; (2) whether petitioners and their wholly owned entities are entitled to the following deductions: a charitable contribution deduction in 2005 for the transfer ofreal property, a worthless debt deduction relating to Reddy Lab (described W or a worthless debt or stock deduction relating

The issues for consideration are: (1) whether Watchman's income is taxable to the Pudlos; we hold it is; (2) whetherthe statute oflimitations bars review of the partnership items or the assessment oftax against the Pudlos for any year at issue; we hold it does not; (3) whether the Pudlos are liable for section 6662(a) accuracy-related penalties; we hold they are not.

As we hold, petitioner was required to report only one ofthese items--the $162 dividend.

er costs of$348 stemming from its DAD transactions for 2004, and similarly whether Marlin may amortize expenses of$174 and deduct collection expenses of$150 stemming from its DAD transactions for 2004; and (3) whether Derringer and/or Marlin is subject to the imposition ofaccuracy-related penalties pursuant to section 6662, for Derringer's 2003 and/or 2004 taxable year(s) and for Marlin's 2004 taxable year because ofan underpayment attributable to a substantial understatement ofincome tax, a gro

The issues for consideration are: (1) whether Watchman's income is taxable to the Pudlos; we hold it is; (2) whetherthe statute oflimitations bars review of the partnership items or the assessment oftax against the Pudlos for any year at issue; we hold it does not; (3) whether the Pudlos are liable for section 6662(a) accuracy-related penalties; we hold they are not.

(SRI); we hold that they do; (2) whether petitioners and their wholly owned entities are entitled to the following deductions: a charitable contribution deduction in 2005 for the transfer ofreal property, a worthless debt deduction relating to Reddy Lab (described W or a worthless debt or stock deduction relating

Conclusion We hold that: (1) Wrentham House Mansion was a capital asset in the hands ofpetitioners; (2) section 263A requires that the designated interest payments made on Wrentham House Mansion be capitalized; (3) petitioners are liable for additions to tax under section 6651(a)(1) for failure to timely file Federal

The issues for consideration are: (1) whether Watchman's income is taxable to the Pudlos; we hold it is; (2) whetherthe statute oflimitations bars review of the partnership items or the assessment oftax against the Pudlos for any year at issue; we hold it does not; (3) whether the Pudlos are liable for section 6662(a) accuracy-related penalties; we hold they are not.

Accordingly, we hold that this Court lacks jurisdiction to hear the Raifmans' attempt to seek a redetermination ofinterest under sec.

Conclusion We hold that: (1) Wrentham House Mansion was a capital asset in the hands ofpetitioners; (2) section 263A requires that the designated interest payments made on Wrentham House Mansion be capitalized; (3) petitioners are liable for additions to tax under section 6651(a)(1) for failure to timely file Federal

(SRI); we hold that they do; (2) whether petitioners and their wholly owned entities are entitled to the following deductions: a charitable contribution deduction in 2005 for the transfer ofreal property, a worthless debt deduction relating to Reddy Lab (described W or a worthless debt or stock deduction relating

Respondent further determined penalties pursuant to section 6662(a) for 2013 and 2014 of$2,374 and $2,107, respectively.

The issues for consideration are: (1) whether Watchman's income is taxable to the Pudlos; we hold it is; (2) whetherthe statute oflimitations bars review of the partnership items or the assessment oftax against the Pudlos for any year at issue; we hold it does not; (3) whether the Pudlos are liable for section 6662(a) accuracy-related penalties; we hold they are not.

The issues for consideration are: (1) whether Watchman's income is taxable to the Pudlos; we hold it is; (2) whetherthe statute oflimitations bars review of the partnership items or the assessment oftax against the Pudlos for any year at issue; we hold it does not; (3) whether the Pudlos are liable for section 6662(a) accuracy-related penalties; we hold they are not.

The issues for consideration are: (1) whether Watchman's income is taxable to the Pudlos; we hold it is; (2) whetherthe statute oflimitations bars review of the partnership items or the assessment oftax against the Pudlos for any year at issue; we hold it does not; (3) whether the Pudlos are liable for section 6662(a) accuracy-related penalties; we hold they are not.

(SRI); we hold that they do; (2) whether petitioners and their wholly owned entities are entitled to the following deductions: a charitable contribution deduction in 2005 for the transfer ofreal property, a worthless debt deduction relating to Reddy Lab (described W or a worthless debt or stock deduction relating

(SRI); we hold that they do; (2) whether petitioners and their wholly owned entities are entitled to the following deductions: a charitable contribution deduction in 2005 for the transfer ofreal property, a worthless debt deduction relating to Reddy Lab (described W or a worthless debt or stock deduction relating

Section 6662(a) Penalties Respondent determined that for 2012 and 2013 petitioners are liable for accuracy-related penalties pursuant to section 6662(a).

We hold that petitioner had constructive dividends of$61,237.50 for 1999 and $20,789 for 2000.

er costs of$348 stemming from its DAD transactions for 2004, and similarly whether Marlin may amortize expenses of$174 and deduct collection expenses of$150 stemming from its DAD transactions for 2004; and (3) whether Derringer and/or Marlin is subject to the imposition ofaccuracy-related penalties pursuant to section 6662, for Derringer's 2003 and/or 2004 taxable year(s) and for Marlin's 2004 taxable year because ofan underpayment attributable to a substantial understatement ofincome tax, a gro

The issues for consideration are: (1) whether Watchman's income is taxable to the Pudlos; we hold it is; (2) whetherthe statute oflimitations bars review of the partnership items or the assessment oftax against the Pudlos for any year at issue; we hold it does not; (3) whether the Pudlos are liable for section 6662(a) accuracy-related penalties; we hold they are not.

Accordingly, we hold petitioners liable for the additions to tax under section 6651(a)(1) for tax years 2007 and 2008.

We hold: (1) Sprague received dividends from Western Property Restoration totaling $82,461 in 2011 and $102,507 in 2012 and (2) Western Property Restoration is liable for section 6662 penalties for 2011 and 2012.

We hold: (1) Sprague received dividends from Western Property Restoration totaling $82,461 in 2011 and $102,507 in 2012 and (2) Western Property Restoration is liable for section 6662 penalties for 2011 and 2012.

Accordingly, we hold that petitioners' 2012 theft loss is $9,194, comprising the $2,000, $1,200, and $5,994 fair market values we have found.

We hold that petitioners are not liable for the section 6662(a) penalty for the portion ofthe underpayment arising from the erroneous reporting ofthe sale oftheir Partnership interests in 2007.

We hold that they did and that this Court has jurisdiction to hear their case; (2) whether petitioners are entitled to deductions for other expenses of $5,000 and for supplies of$16,536 on their Schedule C, Profit or Loss From Business, for tax year 2012.

We hold that they may not because the underlying option transactions ¹Unless otherwise indicated, all Rule references are to the Tax Court Rules ofPractice and Procedure, and all section references are to the Internal Revenue Code (Code) in effect for the year in issue.

We hold petitioners are liable for the section 6662(a) penalty insofar as the Rule 155 computations show a substantial understatement ofincome tax for the 2010 tax year.

We hold that he is not.

We hold that petitioners are not liable for the section 6662(a) penalty for the portion ofthe underpayment arising from the erroneous reporting ofthe sale oftheir Partnership interests in 2007.

Section 6662(a) imposes an accuracy-related penalty equal to 20% ofthe underpaymentto which section 6662 applies.

Because we hold that the period oflimitations is open on account ofthe false and fraudulent nature ofeach 7We reach this conclusion without drawing any inference from petitioners' lack ofbooks and records for the years in issue.

We hold that it did.

We must decide whether to sustain respondent's determinations as modified by respondent in the respective answers in these cases.7 We hold that we shall to the extent stated below.

Section 6662(a) imposes an accuracy-related penalty equal to 20% ofthe underpaymentto which section 6662 applies.

Held: Ps' deductions are denied in full because ofPs' failure to include a qualified appraisal with their 2007 return. See I.R.C. sec. 170(h)(4)(B)(iii)(I). 2. Held, further, because Ps failed to include a qualified appraisal with their 2007 return as required by I.R.C.

Held: Ps' easement provides that the value ofthe contribution for purposes ofdetermining the donees' rights to extinguishment proceeds is the amount ofPs' allowable deductions rather than the fair market value ofthe easement and therefore does not comply with the requirements ofsec. 1.170A-14(g)(6), Income Tax Regs. The conservation purpose is not protected in perpetuity as required by I.R.C.

Therefore, we hold that petitioner's commission income was subject to self-employmenttax under section 1402.

We hold that he is entitled to a portion ofthe disputed deductions, but we will sustain an addition to tax and penalty in amounts to be determined.

As to both questions, we hold in favor ofrespondent.

- 18 - Section 6662(a) imposes an accuracy-relatedpenalty equal to 20% ofthe underpaymentto which section 6662 applies.

Section 6662(a) Accuracy-Related Penalties Respondent determined that petitioners are liable for accuracy-related penalties pursuant to section 6662(a)for the years at issue.

Section 6662(a) imposes an accuracy-relatedpenalty equal to 20% ofthe underpaymentto which section 6662 applies.

We must decide whether to sustain respondent's determinations as modified by respondent in the respective answers in these cases.7 We hold that we shall to the extent stated below.

We hold that she is liable.

Consequently, we hold that petitioner is entitled to an AO credit of$1,210 for 2009.

We hold for the Commissioner on this issue.

We must decide whether to sustain respondent's determinations as modified by respondent in the respective answers in these cases.7 We hold that we shall to the extent stated below.

re entitled to a $25,308 miscellaneous expense deduction and a $1,842 medical and dental expense deduction on Schedule A, Itemized Deductions, for 2011; (4) whether petitioners had taxable Social Security benefits of$26,768 for 2011; (5) whether petitioners are liable for an accuracy-relatedpenalty pursuant to section 6662(a)2 ¹ Because WPL is an S corporation, separate audit procedures do not apply, and we may consider respondent's arguments to both the S corporation returns and petitioners' in

Accordingly, we hold that petitioners are liable for the accuracy-relatedpenalties under section 6662(a) for their underpayments oftax for the 2009 and 2010 tax years.

Section 6662(a) imposes an accuracy-related penalty equal to 20% ofthe portion ofthe underpaymentto which section 6662 applies.

We hold that petitioners should have included the entire $6,945 on their 2010 return.

Accordingly, we hold that petitioners are entitled to a $2,862 deduction for unreimbursed business expenses.

Accordingly, we hold that respondenthas established by clear and convincing evidence that petitioners intended to extend the period oflimitation for the disputed years and that the initial Forms 872 may be reformedto conform with the intent ofthe parties.

ision are: (1) whether respondent properly determined using a bank deposits method of SERVED Dec 14 2015 - 2 - [*2] reconstructing income that petitioner underreported his gross receipts on Schedule C, Profit or Loss From Business, and (2) whetherpetitioner is liable for an accuracy-relatedpenalty pursuant to section 6662(a).¹ FINDINGS OF FACT Some ofthe facts have been stipulated and are so found.

Coastal Heart, as a corporation, bears the burden ofproving that it is not liable for accuracy-relatedpenalties pursuant to section 6662(a).

Coastal Heart, as a corporation, bears the burden ofproving that it is not liable for accuracy-relatedpenalties pursuant to section 6662(a).

6662 applies to the extent determinable in this entity-level proceeding.

Coastal Heart, as a corporation, bears the burden ofproving that it is not liable for accuracy-relatedpenalties pursuant to section 6662(a).

We hold that he is not; and (5) whether petitioner is liable for the accuracy-relatedpenalty pursuant to section 6662(a) for the 2008 and 2009 tax years.

On October 30, 2006, the bankruptcy court entered an order on remand determining, in part, that: (1) petitioners were liable for income tax of$90,836.94 and an addition to tax pursuant to section 6653(a) of$3,010 for the year 1988; (2) petitioners were liable for income tax of$46,795 and a penalty pursuant to section 6662 of$9,359 for the year 1989; (3) the notice ofdeficiency for the years 1988 and 1989 was timely and proper.

Coastal Heart, as a corporation, bears the burden ofproving that it is not liable for accuracy-relatedpenalties pursuant to section 6662(a).

Accordingly, we hold that respondenthas established by clear and convincing evidence that petitioners intended to extend the period oflimitation for the disputed years and that the initial Forms 872 may be reformedto conform with the intent ofthe parties.

On October 30, 2006, the bankruptcy court entered an order on remand determining, in part, that: (1) petitioners were liable for income tax of$90,836.94 and an addition to tax pursuant to section 6653(a) of$3,010 for the year 1988; (2) petitioners were liable for income tax of$46,795 and a penalty pursuant to section 6662 of$9,359 for the year 1989; (3) the notice ofdeficiency for the years 1988 and 1989 was timely and proper.

Accordingly, we hold that respondenthas established by clear and convincing evidence that petitioners intended to extend the period oflimitation for the disputed years and that the initial Forms 872 may be reformedto conform with the intent ofthe parties.

Petitioner, as a corporation, bears the burden ofproving that it is not liable for the accuracy-relatedpenalty pursuant to section 6662(a).

Accordingly, we hold that petitioners are liable for the accuracy-relatedpenalties under section 6662(a) for their underpayments of tax for the years in issue.

6662 applies to the extent determinable in this entity-level proceeding.

MEMORANDUM FINDINGS OF FACT AND OPINION NEGA, Judge: Respondent determined a deficiency in petitioner's Federal income tax for tax year 2011 of$10,952 and an accuracy-relatedpenalty pursuant to section 6662(a) of$2,190.¹ The issues for decision are whether petitioner is ¹Unless otherwise indicated, all section references are to the Internal (continued...) SERVED JUL " 9 2015 - 2 - [*2] (1) entitled to an alimony deduction for a lump sum paid to his former wife in 2011, and (2) liable for an acc

We hold that he is not; and (5) whether petitioner is liable for the accuracy-relatedpenalty pursuant to section 6662(a) for the 2008 and 2009 tax years.

Accordingly, we hold that petitioners are not entitled to claim cost ofgoods sold for 2009 in excess ofthe amount determined or agreed to by respondent.

We hold that it is entitled to deduct some ofthe expenses; (2) whetherpetitioner is entitled to deduct for 2008 a net operating loss carryforward from 2007 of$1,425,000 that resulted from travel expense deductions.

We hold that he did not; (2) whether Mr.

The issues for decision are: (1) whetherpetitioner is entitled to an additional deduction of$27,277 for noncash charitable contributions (we hold that he is not); and (2) whetherpetitioner is liable for the accuracy-relatedpenalty (we hold that he is).

Penalties Section 6662(a) imposes an accuracy-relatedpenalty equal to 20% ofthe underpaymentto which section 6662 applies.

The first SERVED MAY 0 5 2014 -2 - [*2] issue is whetherthe amounts Seismic paid petitioner were guaranteed payments for services under section 707(c).¹ We hold that they were.

We hold they did; (2) whether petitioners overstated their basis in the property they sold in 2005.

Section 6662(a) Penalty Respondent determined that petitioners were liable for an accuracy-related penalty pursuant to section 6662(a) for each ofthe tax years at issue.

We hold that he did not; (2) whether Mr.

The first SERVED MAY 0 5 2014 -2 - [*2] issue is whetherthe amounts Seismic paid petitioner were guaranteed payments for services under section 707(c).¹ We hold that they were.

We hold that she did not.

After stipulations by the parties, the issues for decision are: (1) whether petitioners substantiated their entitlementto business expense deductions beyond those that respondent allowed (with a few exceptions, we hold that they did not); (2) whetherpetitioners failed to include certain amounts in gross income that should have been reported on their return (we hold that they did to the extent described below); (3) whether certain receipts ofMr.

Penalties Section 6662(a) imposes an accuracy-relatedpenalty equal to 20% ofthe underpaymentto which section 6662 applies.

Penalties Section 6662(a) imposes an accuracy-relatedpenalty equal to 20% ofthe underpaymentto which section 6662 applies.

We hold that it did; 2) whether petitioner improperly claimed section 162 business deductions of $1,249,925 for professional fees it incurred during its 2003 taxable year.

Section 6662(a) Penalty Respondent determined that petitioners were liable for an accuracy-related penalty pursuant to section 6662(a) for each ofthe tax years at issue.

Respondent further determined penalties pursuant to section 6662(a) of$4,942 and $404 for tax years 2007 and 2008, respectively.

- 18 - [*18] Section 6662(a) imposes an accuracy-relatedpenalty equal to 20% ofthe underpaymentto which section 6662 applies.

Individual Income Tax Return, the Form 866-A, Explanation ofItems, for 2010 states that respondent is disallowing (continued...) - 3 - [*3] respondent determined a deficiency of$2,848 in the 2010 Federal income tax ofpetitionerRodney Harris and an accuracy-related penalty of$1,447 pursuant to section 6662.2 After disallowingthe exemption for a qualifying child, child tax credit, earned income credit, and American opportunity credit, respondent determined a deficiency of$5,325 in the 2011 Federa

Additionally, at the conclusion ofthe trial respondent's attorney orally moved "to conform the pleadings to the proofto assert the accuracy-related penaltypursuant to Section 6662 due to negligence in this case." We must decide whetherto grant respondent's motion and, ifwe grant it whetherpetitioners are liable for the accuracy-relatedpenalty under section 6662(a).

We hold that he is not; (2) is entitled to deduct certain mortgage interest and real propertytaxes as expenditures arising from a personal residence or as trade or business expenses arising from rental real estate.

Section 6662(a) imposes an accuracy-relatedpenalty equal to 20% ofthe underpaymentto which section 6662 applies.

6662(h).¹ As explained below, we hold that petitioners are liable for the penalty.

Pursuant to section 6662(d)(1)(A), this _ 9 _ [*9] understatement is substantial as it exceeds 10% ofthe tax required to be shown on petitioners' 2007 tax return.

After concessions,2 the issues for decision are: (1) whether loss deductions claimed on petitioner's Schedule E, Supplemental Income and Loss, should be disallowed for 2008 and 2009 under section 469 (we hold that they should); (2) whetherpetitioner is liable under section 6651(a)(1) for an addition to tax for late filing ofa tax return for 2008 (we hold that he is); and (3) whether petitioner is liable for accuracy-relatedpenalties under section 6662(a) (we hold that he is not).

We hold that they are entitled to deduct part ofthat amount; and (2) whether petitioners are liable for the section 6662(a) accuracy-related penalty.

Respondent determined a deficiency in petitioners' 2009 Federal income tax of$6,964 and an accuracy-related penalty of$1,393 pursuant to section 6662.

We hold that he is not entitled to any deduction for travel expenses for the trip to Jamaica.

2Because we hold that the loan guaranties were prohibited transactions, we need not and do not reach the additional questions ofwhether prohibited transactions occurred (i) when FP Company made payments ofwages to Mr.

Section 6662(a) - 27 - [*27] imposes an accuracy-relatedpenalty equal to 20% ofthe underpaymentto which section 6662 applies.

Alexander are liable for accuracy-related penalties pursuant to section f662(a) for the taxable years 1999, 2000, 2001, and 2002, and whether Fountain is liable for accuracy-relatedpenalties pursuant to section 6662(a) for the taxable quarters at issue during 2000 and 2003.

Respondent determined a deficiency in petitioner's 2007 Federal income tax of$6,062 and an accuracy-relatedpenalty of$1,212 pursuant to section 6662.2 After a concession by petitioner,3 the issues remaining for decision are: (1) Whetherpetitioner must include in gross income a distribution he received from his former spouse's retirement account; and (2) whether he is liable for the accuracy-related penalty under section 6662.

After concessions we must consider (1) whetherpetitioners are entitled to a charitable contribution deduction under section 170 for the donation ofa facade easement and (2) whetherpetitioners are liable for a gross valuation misstatement penalty pursuant to section 6662(h) or, in the alternative, for an accuracy-related penalty pursuant to section 6662(a).

We hold she did to the extent stated; 2.

We must determine:2 (1) whether petitionermay deduct Schedule C expenses, related to his law practice, of$132,162, $145,536, and $112,164 for taxable years 2006, 2007, and 2008, respectively.3 We hold that petitioner may deduct some ofthose expenses; 2Our determinations result in corresponding computational adjustments to petitioner's self-employmenttax liability.

Section 6662(a) imposes an accuracy-relatedpenalty equal to 20% ofthe underpayment to which section 6662 applies.

We hold they were not; (2) whether petitioners had unreported income of$93,666.44 that should have been reported on Schedule C, Profit or Loss From Business, for 2004 and $58,855.82 for 2005.

MEMORANDUM FINDINGS OF.FACT AND OPINION WELLS, J_udge: Respondent d termined the following deficiencies in petitioner's Federal income tax and accuracy-related penalties pursuant to section 6662(a)' for his 2007 and 2008 tax y ars: Unless otherwise mdicafed, se tion references are to the Internal Revenue (continued...) SE VED DEC 19 2013 - 2 - [*2] Penalty Year Deficiency sec.

We hold that his bowling activities were not engaged in for profit.

Accordingly, we hold that petitioner is liable for the accuracy-relatedpenalty under section 6662(a).

We hold that it is not; and (3) whether adjustments to income or tax should be made with respect to petitioner's 2004 and 2006 Forms 1040, U.S.

We hold they are not; and (2) whether petitioners are liable for the accuracy-related penalties under section 6662.

We hold that McAllister did not receive $78,849 ofunreported compensation income.

OPINION Section 6662(a) states "[i]fthis section applies to any portion ofan underpayment oftax required to be shown on a return, there shall be added to the tax an amount equal to 20 percent ofthe portion ofthe underpaymentto which this section applies." Section 6662 applies to the portion ofany underpayment which is attributable to negligence or disregard ofrules or regulations or any substantial understatement ofincome tax.

Because petitioner's trade or business is not limited to serving the Church and because most ofhis business activity was conducted at his home office, we hold that he qualifies for the exception and is entitled to a home office deduction of.$8,546.

Section 6662(a) Accuracy-RelatedPenalty Respondent determined that petitioners are liable for accuracy-related penalties pursuant to section 6662(a) for tax years 2006 and 2007.

The issue for decision at present is whether the deductions that the Graevs claimed for charitable contributions ofcash and a conservation easement they donated to the National Architectural Trust ("NAT") should be disallowed because they were conditional gifts.2 We hold that the Graevs' contributions were conditional, non-deductible gifts.

We hold that the IRS gave proper notice ofthe FPAA and that the deficiency notice is valid.

MEMORANDUM OPINION KERRIGAN, Judge: Respondent determined penalties of$9,127 pursuant to section 6662(a) for 2003, $17,048 pursuant to section 6662A for 2004, and $2,663 pursuant to section 6662A for 2005.

We hold that it is not; 'Unless otherwise indicated, all section references are to the Internal Revenue Code (Code) in effect for the years in issue, and all Rule references are to the Tax Court Rules ofPractice and Procedure.

On the facts ofthis case we hold that petitioners are not entitled to deduct any portion ofthe legal expenses incurred to defend the Arrowood suit.

Therefore we hold that petitioner is not liable for the accuracy-relatedpenaltyunder section 6662(a) for 2003.

For these reasons, we hold that petitioner is liable for the section 6662(a) accuracy-relatedpenalty.

We hold that it does; (2) whether $60,000 paid to petitioners in settlement ofa lawsuit is taxable income to petitioners.

Bailey makes no contention as to "reasonable cause" for the 1999 or 2000 return, and we hold that for those two years he is liable for the addition to tax under section 6651(a)(1).

We hold that Goyak & Associates may not deduct the payment, as it is not an ordinary and necessary business expense under section 162 (a) ; (2) whether the $1.4 million paid to the Millennium Plan is taxable to Mr.

Respondent determined the following deficiencies in petitioner's Federal income tax and penalties pursuant to section 6662(a):1 Penalty Year Deficiency Sec.

Hawk, Jr., GST Exempt Marital Trust, Nancy Sue Hawk and Regions Bank, cotrustees; and Nancy Sue Í4awk are each liable as transferees for the 2003 Federal income tax liability ofHoliday Bowl, Inc., of$965,358 and penalties pursuant to section 6662 b) and (h) of$8,035 and $370,072, respectively.

We hold that HCAC's sale of the rights of first refusal is a sale or exchange of a capital asset under section 1222(3) and that the resulting gain is taxed as a long-term capital gain.

Therefore, we hold that petitioner is liable for the section 6662(a) accuracy-related penalty on the portions ofthe underpayments not associated with the misplacement ofthe commission expense.

In any event, we hold that petitioners' early lease cancellation expenses are nondeductible personal expenses.

We hold that petitioner, having failed to make the proper withholding under section 1442, is liable for the tax under section 1461 in accordance with the Rule 155 computation ofearnings and profits.

MEMORANDUM FINDINGS OF FACT AND OPINION GOEKE, Judge : Respondent determined an income tax deficiency for 2005 and an accuracy-re ated penalty pursuant to section 6662(a).1 As a result of the parties' concessions before 1All section references are to the Internal Revenue Code (Code) in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.

Section 6662(a) Accuracy-RelatedPenalty Section 6662(a) imposes an accuracy-relatedpenalty equal to 20% ofthe underpaymentto which section 6662 applies.

On April 14, 2008, Arizona Media submitted Form 870-AD, Offer to Waive Restrictions on Assessment and Collection ofTax Deficiencyand to Accept Overassessment, to the IRS, accepting a deficiency in income tax of$13,494,884 and a penaltypursuant to section 6662 of$2,698,997.

We hold that he is not; (2) whether petitioner is entitled to deductions of$94,603 and $83,874 for disputed mortgage interest expenses reported on Schedule E, Supplemental Income and Loss, for 2007 and 2008, respectively.

We hold that petitioners may not deduct any of the claimed expenditures and are liable for the section 6662(a) accuracy-related penalties for the years in issue.

We hold that respondent has not met his burden with respect to petitioners Scott M.

MEMORANDUM OPINION WELLS, Judge: Respondent determined a deficiency in petitioner's 2003 Federal income tax of$1,456 and a deficiency in petitioner's 2004 Federal income SERVED JUL 23707 - 2 - tax of$22,446 and an accuracy-relatedpenalty pursuant to section 66621 of $4,489.20.

Letter 531-T informed the reader that the notice ofdeficiency related to the tax year ended December 31, 2004, and that for that year respondent had determined a deficiency of$3,034,424, an addition to tax pursuant to section 6651(a)(1) of$716,551.25, and a penalty pursuant to section 6662A (the accuracy related penalty on understatements with respect to reportable transactions) of $875,663.04.

We hold he did to the extent stated herein; (2) whether petitioner is entitled to trade or business expense deductions for 2004 and 2Unless otherwise indicated, section references are to the applicable version ofthe Internal Revenue Code, and Rule references are to the Tax Court Rules of Practice and Proce

Because we hold that the underpayments were attributable to negligence, we need - 22 - not address whether a substantial understatement of income tax exists for either or both of the years at issue.

We hold that she is not; and (2) whether petitioner is entitled to a deduction for interest paid on $100,000 ofhome equity indebtedness when she filed her tax return as "married filing separately".

The first issue is whether petitioners are entitled to the first-time homebuyer credit provided in section 36.1 We hold that they are not.

Bailey makes no contention as to "reasonable cause" for the 1999 or 2000 return, and we hold that for those two years he is liable for the addition to tax under section 6651(a)(1).

We hold that only 600 shares should be included in the estate.

Section 6662(a) imposes an accuracy-relatedpenalty equal to 20% ofthe underpaymentto which section 6662 applies.

The issues for decision are: (1) whetherpetitioner was required to report interest income of$59,061.46 (We hold that petitioner was required, but failed, to report such income.); and (2) whether petitioner is liable for an accuracy-relatedpenalty pursuant to section 6662(a)1 (We hold that he is so liable.).

Held: P is liable for a portion of the deficiency consistent with the findings herein.

Lovett for tax year 2006, pursuant to section 6662 (a) .

We hold that ee should.

Penalties for Inaccurate Returns The third issue for decision is whether Fennel is liable for penalties pursuant to section 6662(a) of $200.80' for the 2004 -tax year, $190.20 for the 2005 tax year,¢and $351.20'for the 2006 tax year.

Consequently, we hold that petitioner is liable for the accuracy-related penalty under 6662 (b) (2) ; - 48 - e shall therefore graNt respondent's cross-motion for summar judgment and deny petitioner's motion for summary judgm nt .

We hold that the Brennans do not qualify for the section 6664 (d) reasonable cause exception:to the section 6662A penalty that was determined byi the IRS.

On the basis of the above, we hold that petitioner has failed to meet the burden of proof with regard to the section 6664(c) (1) exception.

11, and accuracy-related penalties pursuant to section 6662(a)1 of $1,180.17 and $1,347.62 for IUnless otherwise indicated, section references are to the Internal Revenue Code of 1986, as amended, and Rules references are to the Tax Court Rules of Practice and Procedure .

MEMORANDUM FINDINGS OF FACT AND OPINION WELLS, Judge: Respondent determined a deficiency of $22,185 in petitioner's 2007 Federal income tax and an accuracy-related penalty of $4,437 pursuant to section 6662(a).1 The issues we 1Unless otherwise indicated, section references are to the Internal Revenue Code of 1986, as amended and in effect for the year at issue, and Rule references are to the Tax Court Rules of Practice and Procedure.

MEMORANDUM FINDINGS OF FACT AND OPINION WELLS, Judge: Respondent determined deficiencies, additions to tax for failure to file timely pursuant to section 6651(a) (1), and accuracy-related penalties pursuant to section 6662(a) with respect to petitioners' Federal income tax as follows:1 lAll section references are to the Internal Revenue Code in (continued...) - 2 - Addition to Tax Penalty Year Deficiency Sec.

It follows, and we hold, that the net income arising from his psychiatric practice during the years in issue, including any amounts paid to Robucci P.C.

MEMORANDUM FINDINGS OF FACT AND OPINION HAINES, Judge: Respondent det-ermlned a deficiency of $67, 436, an addition to tax pursuant to section 6651 (a) (1) of $15, 938, and a penalty pursuant to section 6662 (a) of .$13, 487 with respect to petitioners' 200.5 Federal income tax.f The sole 1Unless otherwise indicated, all section references are to (continued.

Penalties for Inaccurate Returns The third issue for decision is whether Fennel is liable for penalties pursuant to section 6662(a) of $200.80' for the 2004 -tax year, $190.20 for the 2005 tax year,¢and $351.20'for the 2006 tax year.

For these reasons, we hold that the' ADF commission payments ado not represent excess contributions to petitioners' Roth IRAs.

Section 6662(a) imposes an accuracy- related penalty e<|pial-to 20 percent of the underpayment to which section .6662 applies .

Thus, we find that petitioners are liable f r the accuracy-related penalty for 2002 pursuant to section 6662 in an mount to be determined in the Rule 155 com utation.

statutory notice of deficiency dated September 8, 2008, the Internal Revenue Service (IRS) determined a deficiency of $18,121 in petitioner Robert Harold High's 2006 Federal income tax, as well as an addition to tax of $1,620 pursuant to section 6651(a) (1) and an accuracy-related penalty of $3,624 pursuant to section 6662(a).

We hold it did not; 2.

Respondent determined a $8,418 deficiency in petitioner's 2004 Federal income tax and a $1,683.60 accuracy-related penalty pursuant to section 6662.

Section 6662 requires that we take the greater of the two numbers.

Dagres was in the trade or business of managing venture capital funds; and we hold that he suffered a bad debt loss in connection with that business in 2003, and that it was a business bad debt loss.

We hold that they may not; (2) whether petitioners are entitled to unreimbursed employee business expenses in an amount greater than that allowed or conceded by respondent.

We hold that he is not.

Accuracy-Related Penalty Pursuant to section 6662(a) and (b) (1) and (2), a taxpayer may be liable for a penalty of 20 percent on the portion of an underpayment of tax (1) due to negligence or disregard of rules or regulations or (2) attributable to a substantial understatement of income tax.

Respondent d termined a deficiency of $11,396 in petitioner's 2007 F deral income tax and an accuracy-related penalty of $2,279 pursuant to section 6662(a).

ED SEP 1 9 201i - 2 - Respondent determined a deficiency of $6,824 and an accuracy-related penalty pursuant to section 6662(a) of $1,365 with respect to petitioner's 2006 Federal income tax.

Penalties for Inaccurate Returns The third issue for decision is whether Fennel is liable for penalties pursuant to section 6662(a) of $200.80' for the 2004 -tax year, $190.20 for the 2005 tax year,¢and $351.20'for the 2006 tax year.

Respondent also determined penalties pursuant to section 6662(a) of $1,055.40 and $827.80, respectively.

We hold they did; (2) whether petitioners failed to report $5,592 of nonemployee compensation páid to petitioner Lisa:B.

Accordingly, we hold that petitioner 1s liable for a section 6662(a) accuracy-related penalty due to negligence or disregard of rules or regulations ." To reflect the foregoing, Decision will be entered under Rule 155.

Accordingly, we hold that petitioner is not liable for the accuracy-related penalties under section 6662(a).

We hold it did not ; (2) whether Howard Slater (petitioner) participated in a nonqualified deferred compensation plan under section 409A .

We hold that petitioner is not entitled to an earned income credit and that petitioner is liable for the accuracy-related penalty .

We hold that it is taxable to petitioners, not the corporation.

.continued) penalty for negligence or disregard of rules or regulations should apply, pursuant to section 6662(a) and (b)(1), to any portion of the underpayment not attributable to fraud .

Agreement for, all Tax and other filing and reporting purposes without any disclo sure pursuant to Section 6662 or 6111 of the Code.

In summary, we hold that Holdner Farms was a partnership for Federal income tax purposes in 2004-2006 .

petitioner's Federal income tax for taxable year 2003 of $3,044,000, an accuracy-related penalty pursuant to section 6662(a) of $608,800, and a delinquency addition to tax pursuant Li 3 .

We hold that she did: not conduct her horse activity for profit and is therefore not entitled to deduc t losses from the activity on her returns .

uilt-in gain under section 1374, whether the fair market value of a partnership interest petitioner owned as of January 1, 2000, was $2,980,000, as petitioner contends, or $5,220,423, as respondent contends, and (2) whether petitioner is liable for the accuracy-related penalty respondent determined pursuant to section 6662 .

Accuracy-Related Penalties Respondent determined that for each year at issue petitioner is-liable for an accuracy-related penalty pursuant to section 6662(a) .

petitioner is entitled to a capital loss carryover for tax year 2004 ; (4) whether petitioner's gross income should be increased for a State tax refund, interest income, and retirement income he received during tax year 2004 ; and (5) whether petitioner is liable for the accuracy-related penalties pursuant to section 6662 for tax years 2004 and 2005 .

The issues for decision are (1) whether petitioner received unreported income totaling $35,792; (2) whether petitioner is liable for the fraud penalty pursuant to section 6663 with respect to the underpayment of tax or alternátively the accuracy- related penalty pursuant to section 6662; and (3) whether a penalty under section 6673 should be imposed against petitioner.

.Respondent determined a .deficiency in petiti.oner's .Federal income tax of $8,153 for 2003, a failure t o file addition to tax pursuant to section 6651(a)(1) of $1,780, and an accuracy-related penalty pursuant to section 6662(a) of SERVED JUL 14 2010 $1,631 .1 The issues remaining to be decided relate to petitioner's entitlement to deductions that he claimed on Schedule A, Itemized Deductions, and Schedule C, Profit or Loss.

MEMORANDUM FINDINGS OF FACT AND OPINION HAINES, Judge: Respondent determ:.ned a deficiency'of $259,596 and an accuracy-related penalty pursuant to section 6662(a) of $51,919 with respect to petitioner's 2003 Federal income tax.1 Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended, and all Rule (continued...) SERVED Sep 23 2010 -2- The issues for decision after concessions are: (1) Whether petitioner und

For these reasons, we hold that petitioners have failed to strictly or substantially comply with the requirements of section 1 .170A-13, Income Tax Regs ., and have failed to provide the contemporaneous written acknowledgments required by section 170(f)(8) .

WELLS, Judge: Respondent determined a deficiency of $8,070 in petitioners' Federal income - tax for their 2007 tax year and an accuracy-related penalty pursuant to section 6662(a) of $1,614.

13A taxpayer who is otherwise liable for the accuracy- related penalty may avoid the liability if he successfully invokes one of three other provisions : Section 6662 provides that an understatement may be reduced, first, where the taxpayer had substantial authority for his treatment of any item giving rise to the understatement or, second, where the relevant facts affecting the item's treatment are adequately disclosed and the taxpayer had a reasonable basis for his tre

Therefore, petitioner is liable for the accuracy-related penalty pursuant to section 6662(a) and (b)(1), in an amount to be recalculated after computation of the deficiency .

Accordingly, we hold .that petitioners have not sustained their burden of proving that they are entitled to deduct any portion of the amount paid to NAT as a charitable contribution under section 170 .

We hold that petitioner was a real estate professional but did not properly elect his rental real estate activities as a single activity; 3 .

Accordingly, we hold that petitioner is liable for section 6651(a)(1) additions to tax for 2002 and 2004 .

Accordingly, we hold that petitioners are liable for the addition to tax under section 6651(a)(1) .

we hold that petitioner is not liable for the section 6662(a) accuracy-related penalty for 2004 .

We hold that the Social Security benefits are includable in petitioner's income for 2006 and that petitioner is not liable for the accuracy-related penalty .

In addition, respondent affirmatively asserted in his June 3, 2008, answer that petitioners are also liable for an $11,779 accuracy-related penalty pursuant to section 6662(a) for 2004.1 The issues for decision are whether petitioners are liable for (1) the Federal income tax deficiency and (2) the accuracy-related penalty.2 IUnless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended and in effect for the tax year in issue,

For 2005 respondent determined a deficiency of $23,293 .55 in petitioner's Federal income tax and an accuracy-related penalty of $4,658 .71 pursuant to section 6662 .

the gain realized upon the sale of certain real property for tax year 2003 ; (2) whether losses from petitioners' rental properties constitute losses from a passive activity pursuant to section 469 for tax years 2003 and 2004 ; and (3) whether petitioners are liable for the accuracy-related penalty pursuant to section 6662 for tax years 2003 and 2004 .

Accordingly, we hold that petitioners have failed to substantiate that they paid medical expenses in excess of 7.5 percent of their adjusted gross income for 2006.

Section 6662 provides for a penalty of 20 percent of the underpayment attributable to negligence, disregard of rules or regulations, ær substantial understatement of income tax.

We hold that respondent has not met his burden of production.

We hold that petitioners did conduct their horse activity for profit.

In the notice of deficiency respondent determined that for 2000 petitioners had $1,053,304 gross income from the transfer of the insurance policy and were liable for a $58,985 accuracy-related penalty for negligence pursuant to section 6662(a) .

Respondent determined a $5,062 deficiency in petitioner's 2005 Federal income tax and a ;$958 accuracy-related penalty pursuant to section 6662 .

Tyson received constructive dividends from RS Tyson ; and (4 ) whether petitioners are liable for accuracy-related penalties pursuant to section 6662 (a) .

Accordingly, we hold that the distribution is not includable in petitioner's gross income .

Negligence Penalty As to the Bells, respondent concedes the accuracy-related penalty pursuant to section 6662 in the event the Court upholds the fraud penalty against Mr .

,_redet+ermination of Federal income tax deficiencies tha t , y~ i s ~0 T respondent determined for petitioner' s 2002, 2003, and 2004 tax yy~ears -Respondent also determined additions to tax pursuant t o secti.on,-6651(a)(1) for petitioner ' s 2002 and 2003 tax years and accuracy-related penalties pursuant to section 6662(a) for petitioner's 2002, 2003, and 2004 tax years .

b -12- to recharacterize a return of corpus as capital gain incom:e .7 Accordingly, we hold that the operation of the CRAT anti-abuse regulation is an affected item .

Pursuant to section 6662(a ) and (b)(1) and'(2), a taxpayer may be liable for a penalty of 20 percent on the portion of an underpayment of tax due to negligence or disregard of rules or regulations or a substantial understatement of income tax .

Pursuant to section 6662`(a) and (b)(1)-and (2), a taxpayer may be liable .for a penalty of 20 percent on the portion-of an underpayment of tax due to' negligence or disregard of rules or regulations(cid:127)or a substantial understatement of income tax.

We hold they must recognize long-term capital gain of $44,549 ; (2) whether petitioners had unreported long-term capital gain of $328,901 for 2002 as a result of a distribution by QES .

We hold he is subject to tax; (2) whether Karen Lizalek is taxable on half o f petitioner's income as community property .

We hold that they were .

Pursuant to section 6662(a) and (b)(1) and (2), a taxpayer may be liable for a penalty of 20 percent on the portion of an underpayment of tax due to negligence or disregard of rules or regulations or a substantial understatement of income tax .

We hold that petitioner is liable for accuracy-related penalties under section 6662(a) based on the amount of his underpayments for the years at issue, to be determined in the Rule 155 computations .

Respondent' lists the following expenses as substantiated : Expense Amount substantiated Insurance $529 Office expense 18 6 Rent of other busines s property 1,200 Supplies 1,020 Tools 1,570 Training certifications 313 Professional subscription 110 Total 4,928 Although we hold that in 2002 and 2003 petitioner's'aircraft maintenance activity did not constitute a trade or business under section 162 or an activity for the production o f income under section 212, under section 183(b)(2 ) petitioner's

I liable for the accuracy-related penalties pursuant to section 6662(a) for 2004 and 2005 .

We hold that petitioner may not exclude said payments and that he is not liable for the penalties .

MEMORANDUM FINDINGS OF FACT AND OPINION THORNTON, Judge : Respondent determined a $19,277 deficiency in petitioners ' 2005 Federal income tax and an accuracy -relate penalty of $3,650 pursuant to section 6662 (a) .' After 'Unless otherwise indicated, all section references are to the Internal Revenue Code as,in effect for the taxable year at issue .

Pursuant to section 6662(d)(2.)(A), the term "understatement" is defined as the amount of tax required to be shown on the return for the taxable year over the amount of tax shown on the return for the taxable year .

Respondent also determined that pursuant to section 6662(a), accuracy-related penalties apply to all underpayments of tax attributable to adjustments of the partnership items .' , 3Seemingly implicit in respondent's allegation that Mr .

Accordingly, we hold that respondent correctly applied section 183 by allowin g expense deductions only to the extent of petitioners' income from 'charter fishing .

We hold the payments are deductible becaus e _they.nare ordinary and necessary business expenses .

SERVED Feb 10 2009 J - 2 - --decide are : (1) Whether petitioners are entitled to deduct for taxable year 2002 contract labor expenses in excess of thos e allowed by respondent ; and (2) if not, whether, pursuant to section 6662(c), petitioners were negligent .

We hold that the excess lots were-held for investment purposes and the proceeds are capital gains and losses .

Where'section 6662 applies,`it imposes a penalty equal to 20 percent of an underpayment of tax required to be shown on a return .

6662 provides, in pertinent part, as follows : SEC .

We hold they may not ; 2 .

Bates for their 2001 and 2002 taxable years, which reflected deficiencies and penalties pursuant to section 6662(b) for each taxable year.4 Petitioner filed a timely petition that contained frivolous and meritless tax-protester arguments .

After concessions, the sole issue remaining for decision is whether petitioner is liable for the accuracy-related penalty pursuant to section 6662 .

- 9 - that any of the aforementioned exceptio s under section 108(a) applies to his case, we hold that petitioner's income for 2003 includes the $74,494 .96 from the discha ge of indebtedness that was not reported on his 2003 return .

We hold that each petitioner is liable for the 40-percent accuracy-related penalty of section 6662(h) if, for the years in issue, the Rule 155, calculation determines that each petitioner's underpayment exceeds $5,000 .

Inter alia, section 6662 provides that a penalty shall apply to any substantial understatement of income tax, which is defined as an understatement exceeding the greater of 10 percent of the tax required to be shown on the return or $5,000 .

(CSCI),2 in amounts greater than respondent allowed for tax year 1999 ; (2) whether petitioners overreported the gross receipts of CSCI in 1999 ; and (3) whether petitioners are liable for an accuracy-related penalty pursuant to section 6662(a) for 1999 .

We hold that they are includable in income .

We therefore cannot conclude that at the end of 2001 petitioner had no reasonable prospect of recovering his loss from Anderson Ark.21 We hold that petitioner has failed to prove that he is entitled to a theft loss deduction in 2001 that can be carried back to 1999.22 20Although we evaluate whether or not a reasonable prospect of recovery existed at the end of the year of discovery, we note that petitioner reported the theft loss deductio

Respondent determined a $12,118 deficiency in petitioners' 2001 Federal income tax, a $3,029 .50 addition to tax pursuant to section 6651(a)(1) for failing to file a timely 2001 tax return, and a $2,423 .60 accuracy-related penalty pursuant to section 6662 .

xable years 1997, 1998, 1999, and 2000; (2) whether respondent has established that petitioner is liable for the fraud penalty pursuant to section 66631 for taxable years 1997, 1998, 1999, and 2000; and (3) whether petitioner has established that she is not liable, in the alternative, for a penalty pursuant to section 6662(a).

The Turbo Tax treatment of petitioner's automobile was incorrect, and accordingly we hold that petitioner did; not have $1,132 of reportable gain from the insurance company recovery on his automobile .

We hold that they may not, but that they may treat $150,000 of nonbusiness worthless debts as a short-term capital loss ; (2) whether petitioners may claim miscellaneous itemized deductions in an amount above that allowed by respondent .

Respondent also determined an accuracy-related penalty pursuant to section 6662(a) .

On the basis of the record, we hold that petitioners' have failed to prove that the Hanauer property was placed in service during 2004 .

s ; (2) disallowed petitioner's claimed $3,000 loss carryforward ; (3) disallowed petitioner's claimed casualty losses ; (4) imposed self-employment tax ; (5) adjusted the amount of petitioner's itemized deductions based on petitioner's increased income ; and (6) imposed an accuracy-related penalty pursuant to section 6662 .

We hold that petitioners are liable for the penalty for substantial understatement of income tax in 2003 and negligence in 2004 .

Consequently, we hold that foreach of the years in issue petitioner is, required to include"the gambling winnings in gross income and is not entitled to any deduction for losses.

Section 6662(a) imposes a penalty in the amount of 20 percent of the portion of the underpayment to which section 6662 applies .

Accordingly, we hold that petitioners are not liable for section 6662.(a) ac uracy-related penalties for 2002 and 2003 .

The notice further reflected an accuracy-related penalty pursuant to section 6662(a ) of $5,304 .

Statutory Conflicts Petitioner argues that even if we hold that the Secretary had authority to issue section 301 .6221-1T(c) and (d), Temporary Proced.

Because each understatement of tax was greater than 10 percent of the tax required to be shown on the return or $5,000, each understatement was a substantial understatement of income tax pursuant to section 6662(d)(1)(A) .

tax for negligence under section 6653(a)(1)(A) for the tax year 1987, additions to tax under section 6653(a)(1)(B) for the tax year 1987, and additions to tax - 6 - for negligence or disregard of rules and regulations under section 6653(a)(1) for the tax year 1988 ; (2) an accuracy-related penalty pursuant to section 6662 for the tax year 1990 ; (3) an addition to tax for failure to pay under section 6651(a)(2) for the tax year 19941 ; and (4) a penalty for fraudulent failure to file for the ta

are liable for the accuracy-related penalties for 2001 and 2002 .3 We hold that petitioners are liable for the accuracy-related penalties .

We hold that she is ; (2) whether petitioner is liable for tax on $2,224 of dividend income .

Because petitioners’ understatement of tax was greater than 10 percent of the tax required to be shown on the return, or $5,000, the understatement was a substantial understatement of income tax pursuant to section 6662(d)(1)(A)(i) and (ii).

.) 9 - We hold that petitioners are not liable for the accuracy- related penalties for 2003 and 2004 .

We hold that petitioners are not liable for the section 6662 penalty due to negligence .

Accuracy-Related Penalty The last issue for decision is whether petitioner is liable for an accuracy-related penalty pursuant to section 6662(a) for the 2002 taxable year .

Based on the record, we hold that respondent has satisfied the burden with respect to the - 15 - section 6662(a) accuracy-related penalty for the reasons discussed hereinafter .

on January 7, 2003, and subsequently respondent mailed a notice of deficiency to petitioner in which respondent determined deficiencies in petitioner's Federal income taxes for taxable years 1999 and 2000 in the amounts of $20,764 and $24,532, respectively, together with accuracy-related penalties pursuant to section 6662 for 1999 and 2000 in the amounts of $4,152 .80 and $4,906 .40, respectively .

Because petitioners’ reasons as to why they did not file a petition are irrelevant,11 we hold that petitioners are not entitled to raise as an issue their underlying tax liability.

Respondent determined a $6,391 deficiency in petitioners' 2003 Federal income tax and a $1,278 accuracy-related penalty pursuant to section 6662(a) .' The issues for decision are : (1) Whether petitioners' gross income includes annuity proceeds of $53,885 and related interest income of $1,136, and (2) whether petitioners are liable for the accuracy-related penalty .

After concessions by petitioner,2 the issues for decision are : (1) Whether petitioner is entitled to deduct $15,686 for business expenses claimed on her Schedule C, Profit or Loss From Business, for 2002 ; and (2) whether petitioner is liable for an accuracy-related penalty pursuant to section 6662 for 2002 .

Respondent determined a $4,888 deficiency in petitioner's 2001 Federal income tax and a $977 .60 accuracy-related penalty pursuant to section 6662(a) .

We hold that the notice requirement was met .

Pursuant to section 6662(a) and (b)(2), a taxpayer may be liable for a penalty of 20 percent of the portion of an underpayment of tax attributable to a substantial understatement of income tax .

We hold that petitioner is not liable for the accuracy-related penalties under section 6662 .

Respondent also determ ned a penalty pursuant to section 6662(a) for each year .

After concessions by respondent,2 the issues for decision are : (1) Whether petitioner is entitled to claimed itemized deductions for charitable contributions of $16,500 for 2002 and $20,000 for 2003 and (2) whether petitioner is liable for accuracy-related penalties pursuant to section 6662(a) as determined by respondent.

- 2 - Respondent determined a $26,693 deficiency in petitioners’ 2000 Federal income tax and a $5,338.60 penalty pursuant to section 6662(a).

In sum, we hold that petitioner did not use hindsight in requesting relief and that he acted reasonably and in good faith.

After concessions by both parties,2 the issues for decision are : (1) Whether petitioner is entitled to claimed itemized deductions for charitable contributions totaling $8,500 for 2003 and (2) whether petitioner is liable for the accuracy-related penalty pursuant to section 6662(a) as determined by respondent .

Pursuant to section 6662(a), a taxpayer may be liable for a penalty of 20.

The assessment included an accuracy- related penalty pursuant to section 6662, a failure to pay addition to tax pursuant to section 6651(a)(2), and interest for taxable year 1997.

We hold that petitioner is liable for the accuracy- related penalty under section 6662 .

We hold that petitioners are not entitled.

Section 6662(a) provides that, if it is applicable to any portion of an underpayment in taxes, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

OCT 1 6 2006 er-RVED - 2 - Respondent determined a $7,073 deficiency in petitioners' 2002 income tax and a $1,414 .60 accuracy-related penalty pursuant to section 6662,a) .

Section 6662(a) provides that, if it is applicable to any portion of an underpayment in tax, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

Section 6662(a) provides that, if it is applicable to any portion of an underpayment in taxes, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

Glaze a notice of deficiency for taxable year 1995, in which respondent determined that they had unreported income of $36,424 and were liable for an income tax deficiency of $8,237, an addition to tax pursuant to section 6651(a)(1) of $1,493, and an accuracy-related penalty pursuant to section 6662 of $1,647.

Section 6662 provides for the imposition of a 20-percent penalty for the portion of any underpayment to which the section applies.

We hold that they may not.

We hold that he is not.

Conclusion We hold that pursuant to section 6015(c) petitioner remains jointly and severally liable for $2,745 of the deficiency and $116 of the accuracy-related penalty under section 6662.

We hold that they did to the extent provided herein.

Section 6662(a) provides that, if it is applicable to any portion of an underpayment in taxes, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

Section 6662 provides for a 20-percent penalty for any underpayment to which the section applies.

Accordingly, we hold that petitioner is not liable for a section 6662(a) accuracy-related penalty for 1998.

Section 6662 provides for a 20-percent penalty for any underpayment to which the section applies.

Penalties for Underpayment of Tax Section 6662 provides that a taxpayer may be liable for a penalty of 20 percent of the portion of an underpayment of tax (1) attributable to a substantial understatement of tax or (2) due to negligence or disregard of rules or regulations.

The additional tax imposed pursuant to section 6662(a) falls within the scope of section 7491(c).

1) Whether the passive activity rules of section 469 preclude petitioners from deducting the full amounts of losses from their rental real estate activities for the 1999 and 2000 taxable years, and (2) whether petitioners are liable for accuracy-related penalties for the 1999 and 2000 taxable years pursuant to section 6662(a).

Accordingly, we hold that the lump-sum alimony payments, automobile lease payments, and SBA loan payments made by petitioner under the terms of the settlement agreement are not - 11 - alimony within the meaning of section 71.

We hold ATV is entitled to deduct rent and utility expenses, but not pool repair expenses, for Landmark Hall in excess of those allowed in the notice of deficiency.

- 2 - Respondent determined a deficiency in petitioner’s Federal income tax for the taxable year 1998 of $7,128 and a penalty pursuant to section 6662 of $1,426.

On this issue we hold for respondent.

- 27 - Respondent has asked for the imposition of penalties pursuant to section 6662.

We hold ATV is entitled to deduct rent and utility expenses, but not pool repair expenses, for Landmark Hall in excess of those allowed in the notice of deficiency.

Section 6662(a) Accuracy-Related Penalty Section 6662 provides that if any portion of any underpayment required to be shown on a return is due to negligence or disregard of the rules or regulations, then a taxpayer will be liable for a penalty equal to 20 percent of the underpayment of tax required to be shown on the return that is attributable to the taxpayer

Subsection (b) of section 6662 provides that among the causes justifying imposition of the penalty is any substantial understatement of tax.

- 11 - to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

Negligence Section 6662(a) imposes a penalty with respect “to any portion of an underpayment of tax required to be shown on a return” in an amount “equal to 20 percent of the portion of the underpayment to which this section applies.” Section 6662 applies, inter alia, to underpayments attributable to negligence or disregard of rules or regulations.

- 2 - Respondent determined a deficiency of $11,032, an addition to tax pursuant to section 6651(a)(1) of $2,757, and a penalty pursuant to section 6662(a) of $2,206 with respect to petitioners’ 1994 Federal income tax.

Respondent also determined additions to tax pursuant to section 6651(a)(1) and penalties pursuant to section 6662.

Section 6662(a) provides that, if it is applicable to any portion of an underpayment in taxes, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

We hold that they are not.

The maximum accuracy-related penalty imposed on an (continued...) - 14 - to any portion of an underpayment in taxes, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

Section 6662(a) provides that, if it is applicable to any portion of an underpayment in taxes, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

Section 6662(a) provides that, if it is applicable to any portion of an underpayment in taxes, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

Negligence Section 6662(a) imposes a penalty with respect “to any portion of an underpayment of tax required to be shown on a return” in an amount “equal to 20 percent of the portion of the underpayment to which this section applies.” Section 6662 applies, inter alia, to underpayments attributable to negligence or disregard of rules or regulations.

Pursuant to section 6662(a), a taxpayer may be liable for a penalty of 20 percent on the portion of an underpayment of tax (1) attributable to a substantial understatement of tax or (2) 7 In addition, the 1996 tax return, which is part of the record, reflects that it was not timely filed.

Accordingly, we hold that the Robinsons were employees of the corporation and not subject to self- employment tax for their 1992 and 1993 tax years.

Section 6662(a) provides that, if it is applicable to any portion of an underpayment in taxes, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

- 2 - Respondent determined a $5,762 deficiency in petitioner’s 1997 Federal income tax and a $1,150 accuracy-related penalty pursuant to section 6662.

Section 6662(a) imposes a penalty with respect “to any portion of an underpayment of tax required to be shown on a return” in an amount “equal to 20 percent of the portion of the underpayment to which this section applies.” Section 6662 applies, inter alia, to underpayments attributable to negligence or disregard of rules or regulations.

Section 6662(a) provides that, if it is applicable to any portion of an underpayment in taxes, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

Section 6662(a) provides that, if it is applicable to any portion of an underpayment in taxes, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which section 6662 applies.

Respondent further determined an accuracy-related penalty of $9,399, pursuant to section 6662(a).

OPINION VASQUEZ, Judge: Respondent determined a deficiency of $42,934, an addition to tax pursuant to section 6651(a)(1) of $9,492, and an accuracy-related penalty pursuant to section 6662(a) of $8,587 in petitioner’s 1991 Federal income tax.1 Pursuant to Rule 122, the parties submitted this case fully stipulated.

We hold it may to the extent discussed herein.

Accordingly, we hold that petitioner received and failed to report income in the amounts of $745,000, $65,000, $91,000, and $187,000 for the years 1989, 1990, 1991, and 1992, respectively.

Respondent further determined that petitioners were liable for an accuracy-related penalty pursuant to section 6662 of $195,453.

In the answer, respondent asserted that petitioner is liable for an addition to tax pursuant to section 6662(a).1 After concessions, the issues for decision are: (1) Whether for 1989 petitioners realized $571,179 on the foreclosure sale of certain real property or a lower amount which represents the property's fair market value.

We hold that petitioner has failed to prove that the consulting fees were ordinary and necessary business expenses.

2020-41, at *32, “the section 6662(a) and (h) penalties are distinct (despite the title of section 6662 referring to a (singular) penalty), and the initial determination under each subsection must be separately approved for purposes of section 6751(b)(1).” (Emphasis added.) See also Rogers v.

2020-41, at *32, “the section 6662(a) and (h) penalties are distinct (despite the title of section 6662 referring to a (singular) penalty), and the initial determination under each subsection must be separately approved for purposes of section 6751(b)(1).” (Emphasis added.) See also Rogers v.

2020-41, at *32, “the section 6662(a) and (h) penalties are distinct (despite the title of section 6662 referring to a (singular) penalty), and the initial determination under each subsection must be separately approved for purposes of section 6751(b)(1).” (Emphasis added.) See also Rogers v.

2020-41, at *32, “the section 6662(a) and (h) penalties are distinct (despite the title of section 6662 referring to a (singular) penalty), and the initial determination under each subsection must be separately approved for purposes of section 6751(b)(1).” (Emphasis added.) See also Rogers v.

--- MAJORITY --- Halpern, Judge: By notices of deficiency (notices), respondent determined deficiencies in income tax and penalties for petitioner’s 2005-09 calendar taxable years as follows: Year Deficiency Penalty sec. 6662 2005 $22,571 $4,514 2006 18,462 3,692 2007 9,918 1,984 2008 7,401 1,480 2009 5,965 1,193 Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years at issue, and all Rule references are to the Tax Court Rules of Practice and

erence to “Outside Partnership Basis”, the parties agree that the second decision paragraph, in determining that the FPAA is correct, implicitly upholds the FPAA’s adjustment of outside partnership basis to zero and the application of the 40% penalty to the portion of any underpayment attributable to the gross valuation misstatement as provided by section 6662 (a), (b)(3), (e), and (h).

Respondent included the entire $8.75 million qui tam payment as gross income and determined an income tax deficiency of $3,044,000, an accuracy-related penalty pursuant to section 6662 of $608,800, and a delinquency addition to tax pursuant to section 6651(a)(1) of $151,955.50.

The regulations under section 6662 provide that negligence is strongly indicated where: A taxpayer fails to make a reasonable attempt to ascertain the correctness of a deduction, credit or exclusion on a return which would seem to a reasonable and prudent person to be "too good to be true" under the circumstances * * * .

The regulations under section 6662 provide that negligence is strongly indicated where: A taxpayer fails to make a reasonable attempt to ascertain the correctness of a deduction, credit or exclusion on a return which would seem to a reasonable and prudent person to be "too good to be true" under the circumstances * * * .

The regulations under section 6662 provide that negligence is strongly indicated where: A taxpayer fails to make a reasonable attempt to ascertain the correctness of a deduction, credit or exclusion on a return which would seem to a reasonable and prudent person to be “too good to be true” under the circumstances * * * .

After taking into account the facts and circumstances presented in this case, we do not believe respondent abused his discretion in denying equitable relief to petitioner with respect to the retirement distribution proceeds and interest income or with respect to the section 6662 penalty as it relates to the omitted interest income.

Section 6662(c) provides that for purposes of section 6662, "the term 'negligence' includes any failure to make a reasonable attempt to comply with the provisions of this title, - 5 - and the term 'disregard' includes any careless, reckless, or intentional disregard." The accuracy-related penalty will not be imposed with respect to any portion of an underpayment if it is shown that there was

Kissire and Bob J. Shelton, for petitioners. John Repsis, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION WHALEN, Judge: Respondent determined the following deficiency in, and penalty on, petitioners' Federal income tax for 1989: Deficiency Sec. 6662 Penalty $296,702 $59,340 - 2 - Unless stated otherwise, all section references are to the Internal Revenue Code as in effect for 1989. After concessions, the issues remaining for decision are: (1) Whether the fair market value of the capita

The Imposition of Section 6662 Penalties Respondent also seeks to impose the substantial valuation misstatement penalty, the gross valuation misstatement penalty, and an accuracy related penalty based on negligence.

§ 1.6662-2(c). However, this Court has jurisdiction to readjust partnership items and the applicability of any penalty that relates to an adjustment to a partnership item. §§ 6221, 6226; United States v. Woods, 571 U.S. 31, 39–42 (2013). While there is thus no limitation on our authority to determine the applicability of more than one accuracy-related penalty at the partnership level, Oconee Landing Prop., LLC, T.C. Memo. 2024-73, at *3–4, we need not do so in this case with respect to JSS becau

See § 6662(a) and (b)(1) and (2). For 2010, this penalty would apply to the portion of any underpayment not attributable to the valuation misstatement. See Oconee Landing, T.C. Memo. 2024-25, at *75 (citing Plateau Holdings, LLC v. Commissioner, T.C. Memo. 2021-133, 122 T.C.M. (CCH) 342, 343). We have rejected respondent’s contention that WT Art is entitled to a charitable contribution deduction of zero for 2010 on the theory that it failed to secure a “qualified appraisal” for Palace Banquet. S

§ 1.6662-4(f)(1). Disclosure on the face of a return may also be adequate if that manner of disclosure is permitted by an IRS revenue procedure applicable to the tax year in question. Id. subpara. (2). For 2009 and 2010 the latter form of disclosure was governed by Revenue Procedure 2010-15, 2010-7 I.R.B. 404, and Revenue Procedure 2011-13, 2011-3 I.R.B. 318, respectively. For 2009 and 2010 GWA reported long-term capital gains from termination of the Barrier Contracts on Schedules D, Capital Gai

proved (in writing) by the immediate supervisor of the individual making such determination.” The parties have stipulated that the immediate supervisor of the revenue agent who made the initial determination to assert penalties against the Roots approved the determination of penalties under section 6662, in writing, before the Notice of Deficiency was issued. Accordingly, the Commissioner has satisfied the burden with respect to the supervisory approval requirement of section 6751(b)(1), and the

Argument Four: Section 7491 and Penalties Section 7491(a) applies only to “factual issue[s] relevant to ascertaining the liability of the taxpayer for any tax imposed by subtitle A or B.” Section 7491(a) does not apply to section 6662 penalties (found in subtitle F of the Code). Higbee, 116 T.C. at 447 n.6; see also El v. Commissioner, 144 T.C. 140, 146–49 (2015) (discussing penalties, additions to tax, and additional amounts as compared to taxes). Section 7491(c) applies to penalties, providing

§ 6662(c); Treas. Reg. § 1.6662-3(b)(1). Respondent bears the burden of production and must come forward with sufficient evidence indicating that it is appropriate to impose the penalty. See I.R.C. § 7491(c). Mr. Aubuchon’s understatement shown on his return for tax year 2017 is a substantial understatement of income tax since it exceeds the greater of 10% of the tax required to be shown on the return (which is at least $11,920 for 2017) or $5,000. With respect to negligence, respondent has like

Under section 6662(b)(2), a taxpayer may be liable for a 20% accuracy-related penalty on any portion of an underpayment due to a substantial understatement of income tax. An understatement of income tax is substantial for purposes of section 6662(b)(2) if it exceeds the greater of 10% of the tax required to be shown on the return or $5,000. I.R.C. § 6662(d)(1)(A). Only one accuracy-related penalty may be applied with respect to any given portion of an underpayment, even if that portion is subjec

Referencing what is often called the “no-stacking rule,” we stated: “Only one accuracy-related penalty may be applied with respect to any given portion of an underpayment, even if that portion is penal- izable on more than one of the grounds set forth in section 6662(b).” Id. at *75 n.34. Having decided the applicability of the substantial under- statement penalty at the partnership level, we did not make an affirm- ative determination with respect to negligence. Currently before the Court is re

ent of tax required to be shown on a return if, as provided by section 6662(b)(1), the underpayment is attributable to “[n]egligence or disregard of rules or regulations.” The penalty may also 40 [*40] be imposed for an underpayment attributable to any “substantial understatement of income tax.” § 6662(b)(2). For section 6662(b)(1) purposes, “negligence” includes “any failure to make a reasonable attempt to comply” with the internal revenue laws, and “disregard” includes “any careless, reckless

Penalties Respondent determined an accuracy-related penalty under section 6662(a) for each year at issue. Section 6662(a) imposes a 20% accuracy-related penalty on any portion of an underpayment of tax required to be shown on a return if, as provided by section 6662(b)(1), the underpayment is attributable to “[n]egligence or disregard of rules or regulations.” Negligence includes “any failure to make a reasonable attempt to comply” with the internal revenue laws, and “disregard” includes “any ca

Respondent determined that the Partnership is subject to a civil fraud Served 04/25/24 2 [*2] penalty pursuant to section 6663,1 or, alternatively, that a section 6662 accuracy-related penalty applies.

Adequate Disclosure and Reasonable Basis The Kelleys believe that they qualify for the exception to the section 6662(a) penalty by virtue of their making an adequate disclosure in their return. Treasury Regulation § 1.6662-3(c) excuses a taxpayer’s disregard of rules or regulations if the underpayment is attributable to a position that the taxpayer adequately disclosed on the return. Treas. Reg. §§ 1.6662-3(c), 1.6662-7. However, the disclosure must be made using Form 8275, Disclosure Statement,

Accuracy-Related Penalty Pursuant to Section 6662(a) Section 6662(a) and (b)(1) and (2) imposes a penalty equal to 20% ofthe portion ofan underpayment oftax required to be shown on a return that is attributable to "[n]egligence or disregard ofrules or regulations" and/or a "substantial understatement ofincome tax." Only one accuracy-related penalty may be applied with respect to any given portion ofan underpayment, even ifthat portion is subject to the penalty on more than one ofthe grounds set

Biggs- Owens also agreed to the assessment of$19,645 in additional tax and a section 6662 accuracy-related penalty.

MEMORANDUM FINDINGS OF FACT AND OPINION MARVEL, Judge: In a notice ofdeficiency dated July 10, 2014, respondent determined income tax deficiencies for taxable years 2005, 2006, and 2007 of $1,635,206, $5,765,384, and $1,821,277, respectively, and accuracy-related SERVED Jun 01 2020 - 2 - [*2] penalties under section 6662¹ of$327,041, $1,153,077, and $364,255, respectively.

The section 6662(a) accuracy-relatedpenalty determined in the notice was properly approved as required by section 6751(b)(1). The record includes a Civil Penalty Approval Form, approving imposition ofan accuracy-related penalty against petitioners for 2012 and executed by the IRS tax examiner's immediate supervisor before the date the notice was issued. As a result, we find that respondent met his burden ofproduction with respect to the negligence penalty. The accuracy-related penalty does not a

Only one accuracy- -20- [*20] related penalty may be applied with respect to any given portion ofan underpayment, even ifthat portion is subject to the penalty on more than one of the grounds set out in section 6662(b). Sec. 1.6662-2(c), Income Tax Regs. An "understatement" is defined as the excess ofthe tax required to be shown on the return over the tax actually shown on the return, less any rebate. Sec. 6662(d)(2)(A). An understatement ofincome tax is "substantial" ifit exceeds the greater o

However, the revenue agent's report did not provide the specific subsections for the section 6662 penalties that RA White and RA Pappas proposed.

Respondent - 45 - [*45] contends that petitioners are liable for the accuracy-relatedpenalty for each year on alternative grounds: (1) the underpayment is attributable to negligence or disregard ofrules or regulations within the meaning ofsection 6662(b)(1); or (2) it is attributable to a substantial understatement ofincome tax within the meaning of section 6662(b)(2). An understatement is substantial ifit exceeds the greater of$5,000 or 10% ofthe income tax required to be shown on the return f

1.6662-3(b)(1), Income Tax Regs. The term "disregard" includes any careless, reckless, or intentional disregard. Sec. 6662(c). For purposes ofsection 6662(b)(2), an understatement is equal to the excess ofthe amount oftax required to be shown in the tax return over the amount oftax shown in the return. Sec. 6662(d)(2)(A). An understatement is substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year exceeds the greater of 10 percent ofthe tax required to be s

Although the title ofsection 6662 refers to a (singular) "penalty", section 6662 imposes various distinct penalties, each subpart ofwhich must be separately approved for purposes ofsection 6751(b)(1). However, Palmolive contends that one ofthe section 6662 subparts contains more than one distinct penalty, which (it contends) must be separately approved. Although Agent Wozek obtained Mr. Lynch's supervisory approval for the "negligence" penalty under section 6662(b)(1), Palmolive argues that the

-74- [*74] Section 6662(a) and (b)(2) imposes a 20% accuracy-related penalty for any portion ofan underpaymentthat is attributable to a substantial understatement of income tax. An understatement is the excess ofthe amount oftax required to be shown on the return over the amount oftax imposed that is shown on the return, reduced by any rebate. See sec. 6662(d)(2)(A). An understatement is substantial if it exceeds the greater of 10% ofthe tax required to be shown on the return or, in the case ofa

1.6662- 3(b)(1)(ii), Income Tax Regs. Negligence also includes a failure to maintain accurate records or to substantiate items properly. Sec. 1.6662-3(b)(1), Income Tax Regs. Boneparte was not, in our view, a professional gambler. Many factors point to the fact that he was not one. Boneparte's trips to Atlantic City were therefore personal trips. The expenses ofthese trips were personal expenses. He should have realized it was too good to be true that he could avoid taxation on his Port Authorit

However, we concluded that for purposes ofdetermining the penalty under section 6662 the taxpayerwas not negligent and was reasonable in relying on a no-change letter as an indication ofthe Commissioner's agreement that he continued to be 8Respondent withdrew objections to paragraph 78 and Exhibit 26-J in respondent's posttrial brief.

However, we concluded that for purposes ofdetermining the penalty under section 6662 the taxpayerwas not negligent and was reasonable in relying on a no-change letter as an indication ofthe Commissioner's agreement that he continued to be 8Respondent withdrew objections to paragraph 78 and Exhibit 26-J in respondent's posttrial brief.

-74- [*74] Section 6662(a) and (b)(2) imposes a 20% accuracy-related penalty for any portion ofan underpaymentthat is attributable to a substantial understatement of income tax. An understatement is the excess ofthe amount oftax required to be shown on the return over the amount oftax imposed that is shown on the return, reduced by any rebate. See sec. 6662(d)(2)(A). An understatement is substantial if it exceeds the greater of 10% ofthe tax required to be shown on the return or, in the case ofa

On December 3, 2015, respondent mailed separate statutory notices of deficiency (notices) determining a deficiency of$32,188 and a section 6662 accuracy-related penalty of$6,841.80 for the year at issue.

6662(b)(2), (d). An understatement ofincome tax is substantial ifit exceeds the greater of$5,000 or 10% ofthe tax required to be shown on the taxpayer's return. Sec. 6662(d)(1). Ignoring conditions not relevant here, for purposes ofsection 6662, an understatement is defined as the excess ofthe amount ofthe tax required to be shown on the taxpayer's return over the amount ofthe tax which is shown on the return. Sec. 6662(d)(2)(A). Respondent bears the burden ofproduction with respect to the impos

Beyer's taxable year 2005 that are (continued...) - 149 - [*149] Respondent bears the burden ofproduction with respect to the additions to tax under section 6651(a)(1) and (2) and the accuracy-relatedpenalty under section 6662(a) that respondent determined in the notice. See sec. 7491(c); Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). To satisfy respondent's burden ofproduction, respondent must come forward with "sufficient evidence indicating that it is appropriate to impose" those addi

6662(d)(1); sec. 1.6662-4(b), Income Tax Regs. To compute an understatement, the amount oftax shown on the return is subtracted from the amount oftax required to be shown on the return. Sec. 1.6662-4(b)(ii)(2), Income Tax Regs. The Commissioner bears the burden of production with respect to a section 6662 penalty. Sec. 7491(c). Respondent met his burden ofproduction by showing that petitioner's wages did not qualify as foreign earned income and he could not claim unreimbursed employee expense de

6662(a), (b)(2). An understatement ofincome tax is "substan- tial" ifit exceeds the greater of$5,000 or 10% ofthe tax required to be shown on the return. Sec. 6662(d)(1)(A). Under section 7491(c) the Commissioner bears the burden ofproduction with respect to the liability ofan individual for any penalty. See Higbee v. Com- missioner, 116 T.C. 438, 446 (2001). The deficiency that respondent determined, which we have sustained, is $7,097; that amount exceeds $5,000 and 10% of $37,890, the tax requ

6662(a), (b)(2). An understatement ofincome tax is "substan- tial" ifit exceeds the greater of$5,000 or 10% ofthe tax required to be shown on the return. Sec. 6662(d)(1)(A). Under section 7491(c) the Commissioner bears the burden ofproduction with respect to the liability ofan individual for any penalty. See Higbee v. Com- missioner, 116 T.C. 438, 446 (2001). Taking into account the additional deduc- tion that we have allowed, there is an understatement in petitioners' 2010 income tax in excess

The petition alleges that respondent erred in disallowing the charitable contribution deductions, "erred in determining that Petitioners are liable for the 40% accuracy-relatedpenalty under IRC Section 6662(h)", and "erred in determining that Petitioners are alternatively liable for the 20 percent accuracy-related penalty under IRC Section 6662(a)". Respondent's answer, filed in February 2009, denied the petition's allegations but made no affirmative allegations as to the penalty. We resolved th

6662(a), (b)(2). An understatement ofincome tax is "substan- tial" ifit exceeds the greater of$5,000 or 10% ofthe tax required to be shown on the return. Sec. 6662(d)(1)(A). Under section 7491(c) the Commissioner bears the burden ofproduction with respect to the liability ofan individual for any penalty. See Higbee v. Com- missioner, 116 T.C. 438, 446 (2001). The understatement ofincome tax in this case equals the stipulated deficiency of$7,283; that amount exceeds $5,000, which is greater than

Overview Respondent determined that each petitioner is liable for one or more accuracy-relatedpenalties under sections 6662(a) and 6662A. As to section 6662(a), respondent determined that it applied to the Abramos for each subject year; to the Blakes, the Browns, the Tomassettis, and Our Country for 2005 and 2006; and to the Mejias and Netversity for 2006. As to section 6662A, respondent determined that it applied to the Blakes, the Abramos, the Browns, the Tomassettis, and Our Country for 2007.

Overview Respondent determined that each petitioner is liable for one or more accuracy-relatedpenalties under sections 6662(a) and 6662A. As to section 6662(a), respondent determined that it applied to the Abramos for each subject year; to the Blakes, the Browns, the Tomassettis, and Our Country for 2005 and 2006; and to the Mejias and Netversity for 2006. As to section 6662A, respondent determined that it applied to the Blakes, the Abramos, the Browns, the Tomassettis, and Our Country for 2007.

- 21 - [*21] Section 6662(a) Penalty Respondent's determination ofa $6,096 accuracy-relatedpenalty under section 6662(a) relates to petitioner's filed original 2007 Federal income tax return in which petitioner reported the exchange ofthe 1,000 shares ofUSSI stock as a single block ofstock, even though the 1,000 shares clearly constituted two blocks ofstock with different bases and different holding periods. Section 6662(a) imposes a penalty equal to 20% ofthe portion ofan underpayment attributa

- 5 - [*5] OPINION Section 6662(a) and (b)(1) and (2) imposes a 20% accuracy-relatedpenalty upon the portion ofany underpayment oftax that is attributable to negligence or disregard ofrules or regulations or a substantial understatement ofincome tax. "Negligence" is defined as "any failure to make a reasonable attempt to comply" with the provisions ofthe Code, and "disregard" means any "careless, reckless, or intentional disregard." Sec. 6662(c). An "understatement" is generally the excess ofthe

Overview Respondent determined that each petitioner is liable for one or more accuracy-relatedpenalties under sections 6662(a) and 6662A. As to section 6662(a), respondent determined that it applied to the Abramos for each subject year; to the Blakes, the Browns, the Tomassettis, and Our Country for 2005 and 2006; and to the Mejias and Netversity for 2006. As to section 6662A, respondent determined that it applied to the Blakes, the Abramos, the Browns, the Tomassettis, and Our Country for 2007.

Overview Respondent determined that each petitioner is liable for one or more accuracy-relatedpenalties under sections 6662(a) and 6662A. As to section 6662(a), respondent determined that it applied to the Abramos for each subject year; to the Blakes, the Browns, the Tomassettis, and Our Country for 2005 and 2006; and to the Mejias and Netversity for 2006. As to section 6662A, respondent determined that it applied to the Blakes, the Abramos, the Browns, the Tomassettis, and Our Country for 2007.

Accuracy-RelatedPenalty Section 6662 imposes a 20% accuracy-relatedpenalty on any underpayment attributable to any substantial understatement ofincome tax.

Overview Respondent determined that each petitioner is liable for one or more accuracy-relatedpenalties under sections 6662(a) and 6662A. As to section 6662(a), respondent determined that it applied to the Abramos for each subject year; to the Blakes, the Browns, the Tomassettis, and Our Country for 2005 and 2006; and to the Mejias and Netversity for 2006. As to section 6662A, respondent determined that it applied to the Blakes, the Abramos, the Browns, the Tomassettis, and Our Country for 2007.

- 8 - [*8] For purposes ofsection 6662(b)(2), an understatement is equal to the excess ofthe amount oftax required to be shown in the tax return over the amount oftax shown in the return. Sec. 6662(d)(2)(A). An understatement is substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year exceeds the greater of 10 percent ofthe tax required to be shown in the tax return for that year or $5,000. Sec. 6662(d)(1)(A). The accuracy-relatedpenalty under section 6662(a

Overview Respondent determined that each petitioner is liable for one or more accuracy-relatedpenalties under sections 6662(a) and 6662A. As to section 6662(a), respondent determined that it applied to the Abramos for each subject year; to the Blakes, the Browns, the Tomassettis, and Our Country for 2005 and 2006; and to the Mejias and Netversity for 2006. As to section 6662A, respondent determined that it applied to the Blakes, the Abramos, the Browns, the Tomassettis, and Our Country for 2007.

Overview Respondent determined that each petitioner is liable for one or more accuracy-relatedpenalties under sections 6662(a) and 6662A. As to section 6662(a), respondent determined that it applied to the Abramos for each subject year; to the Blakes, the Browns, the Tomassettis, and Our Country for 2005 and 2006; and to the Mejias and Netversity for 2006. As to section 6662A, respondent determined that it applied to the Blakes, the Abramos, the Browns, the Tomassettis, and Our Country for 2007.

1.6662-4(f), income Tax Regs.; Rev. Proc. 2010-15, 2010-7 I.R.B. 404. Respondent beais the burden ofproduction with respect to the imposition of the penalty here in dispute, see sec. 7491(c), and that burden has been satisfied because the understate¾nent ofincome tax, which equals the deficiency, exceeds $5,000, see secs. 6211, 6662(d)(2), 6664(a). That being so, it is petitioner's burden to establish that the imposition ofthe penalty is not appropriate. See Higbee v. Commissioner, 116 T.C. 438,

6662(b)(1), or (2) a substantial understate- ment oftax, sec. 6662(b)(2). The term "negligence" in section 6662(b)(1) includes any failure to make a reasonable attempt to comply with the Code. Sec. 6662(c). Negligence has also been defined as a failure to do what a reasonable person would do under the circumstances. Leuhsler v. Commissioner, 963 F.2d 907, 910 (6th Cir. 1992), T.C. Memo. 1991-179; Antonides v. Commissioner, 91 T.C. 686, 699 (1988), affd, 893 F.2d 656 (4th Cir. 1990). The term "ne

Treating petitioner as having received the dividends, interest, capital gains, and other income realized by the separate accounts, the IRS determined deficiencies in his Federal income tax of $507,230 and $148,588 and accuracy-related penalties under section 6662 of $101,446 and $29,718 for 2006 and 2007, respectively.

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Accuracy-RelatedPenalty Section 6662(a) and (b)(1) and (2) authorizes the Commissionerto impose a penalty equal to 20% ofthe portion ofan underpaymentoftax that is attributable to the taxpayer's negligence, disregard ofrules or regulations, or substantial understatement ofincome tax. The Commissioner bears the initial burden of production with respect to the taxpayer's liability for the section 6662(a) penalty. Sec. 7491(c). The Commissionermust introduce sufficient evidence "indicating that it

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

1.6662-3(b)(1), Income Tax Regs. The term "disregard" in- cludes any careless, reckless, or intentional disregard. Sec. 6662(c). For purposes ofsection 6662(b)(2) an understatement is equal to the excess ofthe amount oftax required to be shown in the tax return over the amount oftax shown in the return. Sec. 6662(d)(2)(A). An understatement is substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year ex- ceeds the greater of 10 percent ofthe tax required to b

Section 6662(a) Accuracy-Related Penalty Section 6662(a) and (b)(1) and (2) authorizes the Commissioner to impose a penalty equal to 20% ofthe portion ofan underpayment oftax that is attributable to negligence or disregard ofrules or regulations or any substantial understatement ofincome tax. The Commissioner bears the initial burden ofproduction with respect to the taxpayer's liability for the section 6662(a) penalty. Sec. 7491(c). At trial the Commissioner must introduce sufficient evidence "i

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

-44- [*44] terms 'individual' and 'taxpayer', Congress intended to distinguish the two terms."). We need not resolve any potential uncertainty; even ifwe assume that respondenthas the initial burden ofproduction, we are satisfied that he has carried it. Therefore, the burden remains with petitionerto prove the penalty determinations are incorrect. Higbee v. Commissioner, 116 T.C. at 446-447. Respondent has made several alternative penalty determinations. We address each below. B. 40% Penalty Und

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

1.6662-3(b)(1), Income Tax Regs. The term "disregard" includes any careless, reckless, or intentional disregard. Sec. 6662(c). Forpurposes ofsection 6662(b)(2) an understatement is equal to the excess ofthe amount oftax required to be shown in the tax return over the amount oftax shown in the return. Sec. 6662(d)(2)(A). An understatement is substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year ex- ceeds the greater of 10 percent ofthe tax required to be s

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

1.6662-3(b)(1), Income Tax Regs. The term "disregard" includes any careless, reckless, or intentional disregard. Sec. 6662(c). For purposes ofsection 6662(b)(2), an understatement is equal to the excess ofthe amount oftax required to be shown in the tax return overthe amount oftax shown in the return. Sec. 6662(d)(2)(A). An understatement is substantial in the case ofan individual ifthe amount ofthe understatement forthe taxable year ex- ceeds the greater of 10 percent ofthe tax required to be s

1.6662-3(b)(1), Income Tax Regs. The term "disregard" includes any careless, reckless, or intentional disregard. Sec. 6662(c). For purposes ofsection 6662(b)(2), an understatementis equal to the excess ofthe amount oftax required to be shown in the tax return over the amount oftax shown in the return. Sec. 6662(d)(2)(A). An understatementis substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year ex- ceeds the greater of 10 percent ofthe tax required to be s

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Accuracy-RelatedPenalties Respondent determined that petitioners are liable for the accuracy-related penalty under section 6662(a) for a substantial understatement ofincome tax for each year at issue. Section 6662(a) imposes a 20% penalty on any portion ofan underpaymentthat is attributable to, among other things, a substantial understatement ofincome tax. There is a "substantial understatement" ofincome tax for any tax year where the amount ofthe understatement exceeds the greater of (1) 10% of

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

6662(h)(1). A gross valuationmisstatement exists if, for the taxable year at issue, the value or adjusted basis ofpropertyreported on a tax return is 400% or more ofthe amount determinedto be the property's correct value or adjusted basis. See sec. 6662(e)(1)(A), (h)(1), (2)(A)(i). The value or adjusted basis claimed on a return for worthless property is considered to be 400% or more ofthe correct value or adjusted basis.27 See sec. 1.6662-5(g), Income Tax Regs.; see also Rovakat, LLC v. Commiss

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

Section 6662A Respondent also seeks to impose a section 6662A penalty on Sugarloaffor its 2004 and 2005 taxyears. Section 6662A imposes a 20% penalty on understatements due to reportable transactions or listed transactions. Sec. 6662A(a), (b)(2). This penalty increasesto 30% ifthe taxpayer does not adequately disclose the transaction. Sec. 6662A(c). For the same reasons discussed belowwith respect to the 2005 tax year, we find that respondenthas satisfied his burden ofproduction as to this penal

statementpenalties against S, the trading companies, and Mr. and Mrs. Rogers, I.R.C. sec. 6662(a) accuracy-relatedpenalties on the amounts ofS' underpayments due to increased gross receipts for unreported income and the disallowed deductions, and an I.R.C. sec. 6662A listed transaction understatementpenalty against S for the 2005 taxable year. Held: The Brazilian retailers did not intend to enter into a partnership for Federal income tax purposes. Held, further, S had a cost basis, not a carryov

Section 6662 Respondent determined penalties against all of the partnerships in these consolidated cases — that is, for Sugarloaf and for each of the trading companies. He determined that the partnerships were liable for the gross valuation misstatement penalty under section 6662(h) on portions of their underpayments attributable to misstatements o

Respondent's FPAAs (1) disallow deductions claimed by the LLCs in connection with their percentage shares in working interests in oil and gas leaseholds and (2) determine accuracy-related penalties, under section 6662, with respect to partnership items ofthe LLCs. In addition, in the FPAA issued to Jimastowlo for 2006 and in his answer to the petition filed on behalfofOil Coming with respect to 2005, respondent asserts that the passive activity loss limitation rules ofsection 469 apply; i.e., th

Respondent argues that petitioners are - 26 - liable for the accuracy-relatedpenalty under section 6662(a) because ofnegligence or disregard ofrules or regulations under section 6662(b)(1). The term "negligence" in section 6662(b)(1) includes any failure to make a reasonable attempt to comply with the Code. Sec. 6662(c). Negligence has also been defined as a failure to do what a reasonable person would do underthe circumstances. Leuhsler v. Commissioner, 963 F.2d 907, 910 (6th Cir. 1992), afg T

1.6662-3(b)(1), Income,Tax Regs. The term "disregard" includes any careless, reckless, or intentional disregard. Sec. 6662(c). For purposes ofsection 6662(b)(2), an understatement is equal to the excess ofthe amount oftax required to be shown in the tax return over the amount oftax shown in the return. Sec. 6662(d)(2)(A). An understatement is substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year ex- ceeds the greater of 10 percent ofthe tax required to be

Because we conclude that petitioner is liable for the accuracy- related penalty for her substantial understatement, we need not consider whether she is also liable for the section 6662 penalty for negligence.

6662(d)(2)(A). The amount ofan understatement shall be reduced by that portion ofthe understatement which is attributable to: (1) the tax treatment ofany item by the taxpayer ifthere is or was substantial authority for such treatment; or (2) any item ifthe taxpayeradequately disclosed relevant facts affecting the item's tax treatment in the return or in a statement attached to the return and there is a reasonable basis for the tax treatment ofthe item by the taxpayer. Sec. 6662(d)(2)(B). Conside

1.6662-3(b)(2), Income Tax Regs.; see also Neely v. Commissioner, 85 T.C. 934, 947 (1985). An understatementmeans the excess ofthe amount ofthe tax required to be shown on the return over the amount ofthe tax imposed which is shown on the return, reduced by any rebate. Sec. 6662(d)(2)(A). An understatement is substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year exceeds the greater of 10% ofthe tax required to be shown on the return or $5,000. Sec. 6662(d

An accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment, however, for which a taxpayer had reasonable cause and acted in good faith.

6662(d); sec. 1.6662-4(b), Income Tax Regs. The Commissioner has the burden ofproduction under section 7491(c) with respect to the accuracy-relatedpenalty under section 6662. To satisfy that burden, the Commissionermust produce sufficient evidence showing that it is appropriate to impose the penalty. Higbee v. Commissioner, 116 T.C. 438, 446 (2001). The underpayment oftax required to be shown on petitioners' return is the result ofa substantial understatement ofincome tax because the understatem

Overview Section 6662(a) and (b)(1), (2), and (3) provides that taxpayers are liable for a 20% accuracy-relatedpenalty on the portion ofany underpayment ofincome tax attributable to, among other things, negligence or disregard ofrules or regulations, substantial understatements ofincome tax, or substantial valuation misstatements. Only one accuracy-relatedpenalty may be applied with respect to any portion ofan underpayment oftax, even ifthat portion resulted from more than one ofthe types ofmisc

1.6662-3(b)(1), Income Tax Regs. The term "disregard" includes any careless, reckless, or intentional disregard. Sec. 6662(c). For purposes ofsection 6662(b)(2), an understatement is equal to the excess ofthe amount oftax required to be shown in the tax return over the amount oftax shown in the return. Sec. 6662(d)(2)(A). An understatement is substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year ex- ceeds the greater of 10 percent ofthe tax required to be

1.6662-3(b)(2), Income Tax Regs.; see also Nis Family Trust v. Commissioner, 115 T.C. 523, 542 (2000). An understatement means the excess ofthe amount oftax required to be shown on a return over the amount ofthe tax imposed which is shown on the return, reduced by any rebate. Sec. 6662(d)(2)(A). An understatement is substantial in the case of an individual ifthe amount ofthe understatement for the taxable year exceeds the greater of 10% ofthe tax required to be shown on the return or $5,000. Sec

6662(d)(1)(B); and (2) for taxable years beginning on or after October 22, 2004, ifit exceeds the lesser of(a) 10% ofthe tax required to be shown on the return (or, if greater, $10,000) or (b) $10 million, sec. 6662(d)(1)(B). The understatements ofthe Vlachs and Vlach P.C. meet their respective definitions ofa substantial understatement ofincome tax for the years at issue, but those ofConsulting Inc. do not meet the test either before or after the October 22, 2004, amendment to section 6662(d)(1

6662(d)(1)(A). The Commissioner bears the burden ofproduction with respect to this penalty. Sec. 7491©. The Commissioner satisfies the burden by presenting sufficient evidence supporting the relevant penalty. Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Respondent determinedthat petitioners underpaid their income tax by $320,927, $376,318, and $491,571 for the years 2006, 2007, and 2008, respectively. These amounts exceed the "substantial understatement" threshold for each year in question.

, John J. Petito, Tax Matters Partner, docket No. 22706-09; and Jimastowlo Oil LLC, John J. Petito, Tax Matters Partner, docket No. 11263-10. SERVED Aug 26 2013 - 2 - [*2] losses under I.R.C. sec. 469, and asserting accuracy-related penalties under I.R.C. sec. 6662. After a trial addressing the issues raised in the FPAAs (substantive issues), we issued an order directing the parties to address our concern that the so-called income programs purchased by the LLCs constituted partnerships for Feder

Section 6662(a) Accuracy-RelatedPenalty . . Section 6662(a) and (b)(1) and (2) authorizes the Commissionerto impose a penalty equal to 20% ofthe portion ofan underpayment oftax that is attributable to negligence or disregard ofrules or regulations or any substantial understatement ofincome tax. The Commissioner bears the initial burden ofproduction with respect to the taxpayer's liability forthe section 6662(a) penalty. Sec. 7491(c). At trial the Commissionermust introduce sufficient evidence "i

-15- [*15] The IRS contends that Chien is liable for the section-6662(a) penalty for each ofhertax years 2005, 2006, and 2007 because, it contends, her underpayments oftax for these three years were due to negligence or disregard of rules or regulations and her underpayment oftax.for 2006 was due to a substantial understatement ofincome tax. Section 6662(a) imposes an accuracy-relatedpenalty equal to 20% ofan underpayment attributable to a substantial understatement ofincome tax or negligence or

Section 6662(a) Accuracy-Related Penalty Section 6662(a) and (b)(1) and (2) authorizes the Commissioner to impose a penalty equal to 20% ofthe portion ofan underpayment oftax that is attributable to negligence or disregard ofrules or regulations or any substantial understatement ofincome tax. The Commissioner bears the initial burden ofproduction with respect to the taxpayer's liability for the section 6662(a) penalty. Sec. 7491(c). At trial the Commissioner must introduce sufficient evidence "i

Section 6662 Penalties and Reasonable Cause Defense Section 6662(a) and (b)(1), (2), and (3) provides that a taxpayer may be liable for a 20% accuracy-relatedpenalty on the portion ofan underpayment of income tax attributable to, among other things, negligence or disregard ofrules or regulations, a substantial understatement ofincometax, or a substantial valuation misstatement. Section 6662(h)(1) increases the 20% rate to a 40% rate to the extent that the underpayment is attributable to a gross

Accuracy-Related Penalties Unde Section 6662(a) Section 6662(a) and (b)(1) and (2' imposes a 20% accuracy-related penalty on the portion ofan underpaymentthat is attributable to negligence or disregard of rules or regulations or a substantial unde statement ofincome tax.7 The Commissioner bears the burden ofproduction with respect to the applicability ofan accuracy-related penalty determined·in a notice ofdeficiency. Sec. 7491(c). In order to meet that burden, the Commissi ner need only make a p

- 19 - The Commissionerhas the initial burden ofproducing evidence to support the applicability ofa section 6662(a) penalty.: See: 7491(c). To meet this burden, the Commissioner must come forward with sufficie'nt evidence to show that it is appropriate to.impose the penalty. See Higbee v. Commissioner, 116 T.C: at 446- 447. Ifthe Commissioner satisfies his burden ofproduction, the burden of producing evidence shifts to the taxpayer, who must demonstrate by a t preponderance ofthe evidence that h

1.6662-3(b)(1) and (2),.Income Tax Regs.; see also Maanon v. Commissioner, 73 T.C. 980, 1008 (1980). Forpurposés ofsection 6662(b)(2), an understatement is equal to the excess ofthe amount oftax required to be shown in the tax return over the amount oftax shown in the return. Sec. 6662(d)(2)(A). An understatementis substantial in the case ofan individual ifthe amount ofthe understatement for the taxable year exceeds the greater often percent ofthe tax required to be shown in the tax return for t

Section 6662 Accuraby-RelatedPenalty Lastly, we consider whether petitioners are liable for a section 6662(a) accuracy-relatedpenalty. That section imposes an accuracy-relatedpenalty equal to 20% ofthe underpaym nt oftax that is attributable to negligence or other specified grounds. A taxpayer's failure to keep adequate records to substantiate claimed deductions can support the imposition ofthe section 6662(a) accuracy- related penalty on the ground ofnegligence. Sec. 1.6662-3(b)(1), Income Tax

Section 6662 Penalties and Reasonable Cause Defense Section 6662(a) and (b)(1), (2), and (3) provides that a taxpayer may be liable for a 20% accuracy-related penalty on the portion ofan underpayment ofincome tax attributable to, among other things, negligence or disregard ofrules or regulations, a substantial understatement ofincome tax, or a substantial valúation misstatement. Section 6662(h)(1) increases the 20% rate to a 40% rate to the extent that the underpayment is attributable to a gross

- 202 - Because we hold that the QHMC transactions had no economic substance and that their only purpose was to manufacture high-basis stock to generate a tax loss, we find that the multistep contingent liability transaction in which petitioners engaged was a tax shelter for purposes of section 6662. Tax avoidance was clearly a significant (ifnot the sole) purpcse ofthe QHMC transactions. Petitioners are therefore unable to claim that the underpaymentresulting from the improperly claimed tax los

6662(a) and (b)(1) and (2). The term "negligence" in section 6662(b)(1) includes any failure to make a reasonable attempt to comply with the Code, and the term "disregard" includes any careless, reckless, or intentional disregard. Sec. 6662(c). Negligence has also been defined as the failure to exercise due care or the failure to do what a reasonable and ordinarily prudent person would do under the circumstances. See Allen v. Commissioner, 92 T.C. 1, 12 (1989), aff'd, 925 F.2d 348, 353 (9th Cir.

Accuracy-Related Penalties Unde Section 6662(a) Section 6662(a) and (b)(1) and (2' imposes a 20% accuracy-related penalty on the portion ofan underpaymentthat is attributable to negligence or disregard of rules or regulations or a substantial unde statement ofincome tax.7 The Commissioner bears the burden ofproduction with respect to the applicability ofan accuracy-related penalty determined·in a notice ofdeficiency. Sec. 7491(c). In order to meet that burden, the Commissi ner need only make a p

-'29 - underpayrhents for those years (which we have sustained) are attributable to negligence or disregard ofrules or regulations under section 6662(b)(1) and/or to substantial understatements ofincome tax under section 6662(b)(2). For purposes ofthe accuracy-relatedpenalty, "negligence" includes any failure to make a reasonable effortto comply with the Code, and "disregard" includes any careless, reckless, or intentional disregard. Sec. 6662(c). "Negligence" for this purpose also includes a ta

and in effect for the tax years at issue, and all Rule references are to the Tax Court Rules of Practice and Proceau e. As an alternative to the sec. 6663+ civil,fraud penalty in he event the Court decides it.does not apply, respondent determined a sec. 6662·(a) accuracy-related penalty for both the Owens' 2002 and 2003 tax years. - 3 - After concessions by petitioners and respondent,3 the issues left for decision are: 3Respondent concedes the sec. 6663 civil fraud penalties he determined again

Pursuant to section 6664(c)(1), the accuracy-relatedpenalty under section 6662 does not apply to any portion ofan underpayment for which a taxpayer establishes that he or she: (1) had reasonable cause; and.(2) acted in good faith.

) 2003 $15,025 $6,010 2004 24,077 8,266 2005 3,403 1,361 - 3 - Jan P. Marks, docketNo. 14860-09: Penalty Year Deficiency Sec. 6662(h) 2003 $44,311 $17,724 2004 22,188 6,873 Donna Weinheim, docket No. 14865-09: Penalties Year Deficiency Sec. 6662(h) Sec. 6662(a 2003 $50,119 $20,048 -0- 2004 . . 4,710 -0- $718 Susan G. Anderson and Rick B. Honey docketNo. 14866-09: Penalty Year Deficiency Sec. 6662(h) 2003 $29,436 $11,774 Thomas Rukan and Alexandra Wheeler, docket No. 20138-09: Penalties Year Defi

and in effect for the tax years at issue, and all Rule references are to the Tax Court Rules of Practice and Proceau e. As an alternative to the sec. 6663+ civil,fraud penalty in he event the Court decides it.does not apply, respondent determined a sec. 6662·(a) accuracy-related penalty for both the Owens' 2002 and 2003 tax years. - 3 - After concessions by petitioners and respondent,3 the issues left for decision are: 3Respondent concedes the sec. 6663 civil fraud penalties he determined again

h Mr. Repetto's Roth IRA owned a 98% interest. Respondent determined the following deficiencies, additions to tax, and penalties: Mr. and Mrs. Repetto, docket No. 17204-09 Additions to tax and penalty Year Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2)' Sec. 6662A 2004 $28,779 $1,179.23 to be determined $9,259.32 2005 83,908 2,131.20 to be determined . 21,855.65 2006 62,339 3,645.68 to be determined 13,879.43 1Respondent explains in the notice ofdeficiency that the additions to tax under sec. 6651(a

) 2003 $15,025 $6,010 2004 24,077 8,266 2005 3,403 1,361 - 3 - Jan P. Marks, docketNo. 14860-09: Penalty Year Deficiency Sec. 6662(h) 2003 $44,311 $17,724 2004 22,188 6,873 Donna Weinheim, docket No. 14865-09: Penalties Year Deficiency Sec. 6662(h) Sec. 6662(a 2003 $50,119 $20,048 -0- 2004 . . 4,710 -0- $718 Susan G. Anderson and Rick B. Honey docketNo. 14866-09: Penalty Year Deficiency Sec. 6662(h) 2003 $29,436 $11,774 Thomas Rukan and Alexandra Wheeler, docket No. 20138-09: Penalties Year Defi

Section 6662(a) Accuracy-Related Penalty Section 6662 provides that a taxpayermay be liable for a 20% accuracy- related penalty on the portion ofan underpayment ofincome tax attributable to negligence or disregard ofrules or regulations or a substantial understatement of income tax.

and in effect for the tax years at issue, and all Rule references are to the Tax Court Rules of Practice and Proceau e. As an alternative to the sec. 6663+ civil,fraud penalty in he event the Court decides it.does not apply, respondent determined a sec. 6662·(a) accuracy-related penalty for both the Owens' 2002 and 2003 tax years. - 3 - After concessions by petitioners and respondent,3 the issues left for decision are: 3Respondent concedes the sec. 6663 civil fraud penalties he determined again

Pursuant to that section, accuracy-related penalties under section 6662 do not apply to any portion of an underpayment for which a taxpayer establishes that he or she: (1) had reasonable cause; and (2) acted in good faith.

With respect to the accuracy-related penalty under section 6662, respondent determined that the 40% accuracy-related penalty of section 6662(a) and (h) (or alternatively the 20% accuracy-related penalty under section 6662(a) and (b)(1) (or alternatively (b)(2))) applied to the portion of the underpayment attributable to a gross valuation misstatement (or alternatively negligence or disregard of rul

Generally, the section 6662 accuracy-related penalty will not be imposed with respect to any portion of an underpayment if the taxpayer can show that there was reasonable cause for that portion and that he acted with good faith with respect to that portion.

h respect to petitioner's services as income received solely by petitioner, disallowed the business expense deductions claimed by the various entities that had been formed, - 6 - reallocated legitimate deductions to petitioners' individual tax returns, and proposed the tax deficiencies and section 6662(a) accuracy-related penalties set forth above. Before the issuance of a notice of deficiency, petitioners agreed with and paid the tax deficiencies. The only matter in dispute is respondent's det

Section 6662(a) Substantial Understatement of Tax Respondent determined in the notice of deficiency that petitioners are liable for the accuracy-related penalty under section 6662(a) for a substantial.understatement of income tax for 2007. Section 6662(a) and (b) (2) imposes a penalty equal to 20 percent of any underpayment of tax that is due to a substantial understatement of income tax. See sec. 6662(a), (b) (2). An individual substantially understates his or her income tax when the reported t

6662(d) (2) (A). An understatement is substantial if it exceeds the greater of 10 percent of the tax required to be shown on the return for the taxable year or $5,000. See sec. 6662(d) (1) (A).' The Commissioner bears the burden of production with respect to the applicability of an accuracy-related penalty determined in a notice of deficiency. Sec. 7491(c). In order to meet that burden, the Commissioner need only make a prima facie case that imposition of the penalty is appropriate. Higbee v. Co

Introduction Section 6662(a) 1mposes an accuracy-related penalty of 20 percent of the portion of an underpayment of tax attributable to, among other things, negligence or disregard of rules. or regulations (without distinction, negligence), any substantial understatement of income tax, or any substantial valuation misstatement. Sec. 6662(a) and (b) (1)- (3). In the case of a gross valuation misstatement, the penalty is increased from 20 percent to 40 percent. Sec. 6662(h) (1). The accuracy-relat

6662(d) (1) (A). The term "understatement" means the excess of the amount of tax required to be shown on the return for the taxable year over the amount of tax imposed which is shown on the return, reduced by any rebate. Sec. 6662(d) (2) (A). The amount of the "understatement" is reduced by that portion of the understatement which is attributable to: (1) The tax treatment of any item if there is or was substantial authority for such treatment; or (2) any item if the relevant facts affecting the

6662(a) and (b) (1) and s(2) . T1 e term "negligence" ir section 6662 (b) (1) includes any - failure to make a reasonable attempt to comply with the Code, and the term, "disregard" includes any careless, reckless,e or intenti nal disregard. Sec. 6662(c). Negligence has also been definec as thé failure to exercise due- care or the failure to do what a easonable person wou].d ,do under the circumstances. See Allen . Commissioner, 92 T.C. 1, 12 (1989), affd. 925 F.2d 3483 353 (9t Cir. 1991) ; Neely

Introduction Section 6662 imposes an accuracy-related penalty if any part of an underpayment of tax required to be shown on a return is due to, among other things, negligence or disregard of rules or regulations (without distinction, negligence), a substantial understatement of income tax, or a substantial valuation misstatement.

sion are: (1) Whether Historic Boardwalk Hall is a sham; (2) whether Pitney Bowes was a partner in Historic Boardwalk Hall; (3) whether New Jersey Sports and Exposition Authority (njsea or petitioner) transferred the benefits and burdens of ownership of the East Hall to Historic Boardwalk Hall; and (4) whether Historic Boardwalk Hall is liable for section 6662 accuracy-related penalties for years 2000, 2001, and 2002.

Section 6662(a) Penalties Section 6662 imposes an accuracy-related penalty equal to 20 percent of an underpayment of Federal income tax attributable to a taxpayer's substantial understatement of income tax or to a taxpayer's negligence or disregard of rules and regulations. Sec. 6662(a) and (b) (1) and (2). Section 6664(a) defines an "underpayment" for relevant purposes as an excess of the correct tax over the sum of (a) the amount shown as tax on the return and (b) amounts not shown as tax on t

6662(a) and (b) (1) and (2) . The term "negligence" in section 6662 (b) (1) includes any failure to make a reasonable attempt to -comply with .the Code, and the term "disregard" includes any careless, reckless, or intentional disregard. . Sec. 6662(c) . Negligence has also been defined as the failure to exercise due care or the failure to do what a reasonable person would do under the circumstances. See Allen v. Commissioner, 92 T.C. 1, 12 (1989), affd. 925 F.2d 348, 353 (9th Cir. 1991) ; Neely

6662(c). Negligence has also been defined as the failure to exercise due care ór the failure to do what a reasonable person would do under the circumstances. See Allen v. Commissioner, 92 T.C. 1, 12 (1989), gaffd. 925 F.2d 348, 353 (9th Cir. 1991); Neely v. Commissioner, $5 T.C. 934, 947 (1985). An "understatement of income tax" is substantial if it exceeds the greater of 10 percent of the tax required to-be shown on the return or $5,000. Sec. 6662(d) (1) (A). The section 6662 accuracy-related p

The majority states: "The effect of the mandate concerning the section 6662 penalty is that if the penalty does not relate directly to a numerical adjustment to a partnership item, it is beyond our jurisdiction." Majority op. p. 11. The m'ajority thus "Petitioner does not contest or disagree with the finding that the partnership was a sham. In fact, petitioner has conceded the applicability sof the 20-percent accuracy-related penalty for either negligence or substantial understatement of income

6662(a) and (b) (1) and (2). The term "negligence" in section 6662(b) (1) includes any failure to make a reasonable attempt to comply with the Code, and the term "disregard" 'includes any careless, reckless, or I intentional disregard. Sec. 6662(c). Negligence has also been defined as the failure to exercise due care or the failure to do what a reasonable person would do under the circumstances. See Allen v. Commissioner, 92 T.C. 1, 12 (1989), affd. 925 F.2d 348, 353 (9th Cir. 1991); Neely v. Co

6662(a) 2003 $17,994 $3,599 2004 19,240 3,848 2005 23,216 3,568 The issues for decision are whether, for those years, petitioner: (1) Underreported his gross income; (2) overstated his deductions; and (3) is liable for the accuracy-related penalties . Unless otherwise stated, section references are to the Internal Revenue Code in effect for the years in issue, and Rule references are to the Tax Court Rules of Practice and Procedure. We round all amounts to the nearest dollar. Petitioner bears th

6662(c) ; Neely v. Commissioner, 85 T .C . 934, 947 (1985) ; sec . 1.6662-3(b)(1), Income Tax Regs . "Disregard" includes any careless, reckless, or intentional disregard of rules or regulations . Sec . 6662(c) ; sec . 1.6662- 3(b)(2), Income Tax Regs .' An "understatement" of income tax is the difference between the amount of tax required to be shown on the return and the amount of tax actually shown on the return. Sec . 6662(d) (2) (A) . A "substantial understatement" exists if the understatem

16 , 2008 - 11 - penalty .under section 6662(a )-because of a substantial under- statement of-income tax (substantial understatement) under section 6662.(b) (2) for each of those years . Section 6662 (a),imposes an accuracy-.related penalty equal to 20 percent of the underpayment attributable to, .inter alia , substantial understatement under section 66.62(b)(2) . For pur- poses of section 6662.(b)(2),7an understatement is equal to the excess of the amount of tax-required to be shown in the tax

6662(a) and (b) (1) and (2). The term "negligence" in section 6662(b) (1) includes any failure to make a reasonable attempt to comply with the Code, and the term "disregard" includes any careless, reckless, or intentional disregard. Sec. 6662(c). Negligence has also beens defined as the failure to exercise due care or the failure to do what a reasonable person would do under the.circumstances. See Allen v. Commissioner, 92 T.C. 1, 12 (1989), affd. 925 F.2d 348, 353 (9th Cir. 1991); Neely v. Comm

Section 6662(a) and (b)(2) provides that taxpayers will be liable for a penalty equal to 20 percent of the portion of an underpayment of tax attributable to a substantial understatement of income tax . Section 6662(d)(1)(A) provides that a substantial understatement of income tax exists if the amount of the understatement exceeds the greater of (1) 10 percent of the tax required to be shown on the return or (2 ) $5,000 . Section 7491(c) provides that the Commissioner bears the burden of producti

Accuracy-Related Penalty Section 6662(a) and (b) (1) and (2) imposes a penalty equal to 20 percent of any underpayment of tax that is attributable to negligence or a disregard of rules or regulations or to a substantial understatement of income tax. Negligence includes any failure to keep adequate books and records or to substantiate items properly. Sec. 1.6662-3(b) (1), Income Tax Regs. An understatement is substantial if it exceeds the greater of: (1) 10 percent of the tax required to be shown

6662(d) (1) (A) . As pertinent here, in the case of a corporatior other than"an S corporation, an understatement is substanti 1 (1) for taxable years that began on or before October 22, 2004, if it exceeds the greater=of 10 - percent of the - tax required to be shown in the tax return for the taxable year or $10, 000, se . 6662 (d) (1).(B) , and (2) for taxable years that began'after October 22, 2004, if it exceeds the lesser of (a) 10 percent of the tax -required to be shown in the tax return f

7 The term-"negligence" in section 6662(b)(1) includes any failure to make a reasonable attempt to comply with the Code . Sec . 6662(c) . Negligence has also been defined as a failure to do what a reasonable person would do under the circumstances . Leuhsler v . Commissioner, 963 F .2d 907, 910 (6th Cir . 1992), affg . T .C. Memo . 1991-179; Antonides v . Commissioner, 91 T .C .. 686, 699 (1988),-affd. 893 F .2d 656 (4th Cir . 1990) . The term "negligence" also includes any failure by the taxpay

enses under section 162(a), and if so, whether the payments are deductible contributions to a multiple- employer welfare benefit plan under section 419A(f)(6)(cid:127), and, second, whether petitioners are liable for accuracy-related penalties under section 6662 . Unless otherwise indicated, all section references are to the Internal Revenue Code (Code) in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure . FINDINGS OF FACT Some of the fa

for a charitable contribution under section 170(a) in connection with their donation of a house to a local volunteer fire department for training exercises and demolition and (2) whether petitioners are liable for any accuracy-related penalty under section 6662. FINDINGS OF FACT Some of the facts have been stipulated, and the stipulated facts and attached exhibits are incorporated in our findings by this reference. Theodore R. Rolfs and Julia A. Gallagher (hereafter, petitioners, and Theodore R

Respondent asserted in an amended answer a $36,691,796 accuracy-related penalty under section 6662 for substantial understatement of income tax.

Penalty Section 6662 is applicable at the individual partner level and may be raised in separate proceedings at the partner level following the present partnership proceeding.” This Court issued Petaluma I on October 23, 2008, holding that it had jurisdiction to decide: (1) That Petaluma should be disregarded for tax purposes; (2) that the partners had no

6662(c) . For purposes of section 6662(b)(2), an understatement is equal to the excess of the amount of tax required to be shown in the tax return over the amount of tax shown in such return . Sec . 6662(d)(2)(A) . An understatement is substantial in the case of an individual if the amount of the understatement for the taxable year exceeds the greater of ten percent of the tax required to be shown in the tax return for that year or $5,000 . Sec . 6662 (d) (1) (A) . The accuracy-related penalty u

6662(c) ; Neely v . Commissioner , 85 T.C. 943, 947 (1985) ; sec . 1 .6662-3(b)(1), Income Tax Regs . "Disregard" includes any careless, reckless, or intentiona l disregard of rules or regulations . Sec . 6662(c) ; sec . 1 .6662- 3(b)(2), Income Tax Regs . An "understatement" of income tax is the difference between the amount of tax required to be shown on the return and the amount of tax actually shown on the return . Sec . 6662(d)(2)(A) . A "substantial understatement" exists if the understate

Valuation Misstatement Penalty Respondent argues that petitioner is liable for either a substantial or gross valuation penalty pursuant to section 6662(b)(3) and (e) or (h) . Section 6662(b)(3) imposes a 20- percent penalty on that portion of an underpayment which results from a substantial valuation misstatement . There is a substantial valuation misstatement if the value of any property claimed on the return is 200 percent or more of the amount determined to be the correct amount . Sec . 6662(

Negligence Penalty Under Section 6662(a ) As an alternative to the fraud penalty, respondent determined that petitioners are liable for a section 6662(a) accuracy-related penalty for 2001 on account of their failure to report the gain on the sale of Silver Spur . Section 6662(a) and (b)(1) and (2) imposes a 20-percent penalty on an underpayment of tax that results from negligence or disregard of rules and regulations or from a substantial understatement of income tax . Negligence is defined as a

A ;partner is subject to the section 6662(a) accuracy- related penalty if he fails to comply with this requirement. See sec .1, 6222 (d) ; Blonien v . Commissioner, 118 T .C . 541,550 n-.5 (2002) . Petitioner, as a tax attorney of long standing, shoul d familiar with this mechanism. To simply not report.the income is n'ot,-seasonable and does not show good faith . We ;therefore findthe.section 6662(a) accuracy related penalty is applicable , "Petitioners do not argue they received information fr

Section 6662(a) Accuracy-Related Penaltie s Section 6662(a) imposes an accuracy-related penalty on an underpayment of tax that is equal to 20 percent of any underpayment that is attributable to one of the causes listed in subsection (b) . Among those causes is negligence or disregard . of rules or regulations and a substantial . understatement of income tax . Sec . 6662(b)(1) and (2) . Respondent contends that petitioners are liable for the section 6662 penalty because (1) their underpayment of

6662(c) . For purposes of section 6662(b)(2), an understatement is equal to the excess of the amount-of tax required to be shown in the'tax return over the amount of tax shown in such return . Sec . 6662(d)(2)(A) . An understatement is substantial in the case of an individual if the amount of the understatement for the taxable year exceeds the greater of ten percent of the tax required to be shown in the tax return for/that year or $5,000,. Sec .. 6662(d) (1) (A) . The accuracy-related penalty u

Section 1 .6662- 4(e)(2), Income Tax Regs ., provides that an item will not be f treated as adequately disclosed if a taxpayer does not have a reasonable basis for the position as defined in section 1 .6662- 3(b)(3), Income Tax Regs . Section 1 .6662-3(b)(3), Income Tax Regs ., provides that reasonable basis is a relatively high standard that is significantly higher than not frivolous . A return position that is merely arguable does not satisfy the reasonable basis standard . . Id . A taxpayer

6662(d)(2)(B)(1)' In .order to satisfy the substantial - 109 - authority standard of section : 6662(d)(2)(B)(1), petitioners must A show that the weight of authorities supporting their tax return is substantial in relation to those supporting a,contrary posi- tion . See Antonides v . Commissioner , 91 T.C. 686, 702 (1988), affd . 893 F .2d 656 (4th Cir . 1990) . That standard is not so, stringent that a taxpayer's treatment must be one that is ulti- mately upheld in litigation or that has a gre

--- MAJORITY --- Goeke, Judge: Respondent determined a deficiency of $3,355,906 in petitioner’s Federal income tax for 2001 and imposed a penalty under section 6662 of $1,298,284.

We next consider whether petitioners are liable for the accuracy-related penalty under section 6662(a). Respondent determined that petitioners were liable for an accuracy-related penalty for 2004 of $10,747. Pursuant to Rule 142(a)(1), the taxpayer generally bears the burden of proof. Section 7491(c) provides an exception to Rule 142(a)(1) and places the burden of production on the Commissioner to show that penalties are appropriate. Higbee v. Commissioner, 116 T.C. 438, 440-441 (2001). However,

However, section 6664(c)(1) provides that a penalty under section 6662 will not be imposed on any portion of an underpayment if the taxpayer shows reasonable cause for such portion of the underpayment and that the taxpayer acted in good faith with respect to such portion .

Section 6662 Accuracy-Related Penalty Section 6662 (a) . and . (b) (1) and (2)i imposes a 20-percent accuracy-related penalty on any portion of a tax underpayment that is attributable to, among'other things : . (1) Negligence or , .disregard of rules and regulations ; or (2) any substantial understatement of income tax . Negligence . includes failure to ... make a reasonable attempt-to comply with the tax-code , exercise ordinary care in preparing a tax return, or to substantiate items . properl

- 8 - Accuracy-Related Penalty Section 6662(a) imposes a 20-percent .penalty on any portion of an underpayment that is attributable to, among other things, negligence or disregard of rules or regulations . See sec . 6662(b)(1) . For this purpose, negligence includes any failure to make a reasonable attempt to comply with the tax code ; the term "disregard" includes "careless, reckless, or intentional disregard ." Sec . 6662(c) . We find that petitioner's understatement, resulting from his improp

' Talmage and an accuracy-related penalty under section 6662 (a) of $15,436 with respect to Annette C .

r a $28,565 .70 addition to tax for failure to file a timely return under section 6651(a)(1), a $64 .98 addition to tax for failure to pay estimated taxes under SERVED APR - 3 2008 -2- section 6654, and a $115,345 .60 accuracy-related penalty under section 6662 . ' After concessions,' two issues remain for decision . The first issue is whether petitioners are liable for an addition to tax under. section 6651(a)(1) for failure to file timely their income tax return, and the second issue is whethe

The explanation of items also provides several alternative reasons for reducing the partners’ adjusted bases in Petaluma and determines that penalties under section 6662 are applicable.

Section 6662(a) imposes an accuracy-related penalty equal to 20 percent of the underpayment to which section 6662 applies.

issue is whether petitioner is liable for the 10-percent additional tax on the distribution from his retirement account under section 72(t) . We hold that he is . The third issue is whether petitioner is liable for the accuracy-related penalty under section 6662 . We hold that he is . The fourth issue is whether we should impose a penalty on petitioner under section 6673 . We hold that we shall not impose a penalty in this case, but caution petitioner that he is at risk of a penalty if he brings

Petitioners offered no evidence, and advance no argument, under section 6662 with respect to their return .treat- ment for the years at issue of (1) the various items as to which respondent made determinations that petitioners conceded and (2) the expenditures in question as to which respondent made determinations that we sustained .5 On the instant record, we find that the burden of production that respondent

Petitioner presented no evidence addressing the section 6662 penalty as relates to these two items .

Penalty Respondent determined that petitioners were liable for a 20- percent accuracy-related penalty under section 6662(a) due to (1) negligence or disregard of rules or regulations, (2) a substantial understatement of income tax, or (3) a substantial valuation overstatement, and, to the extent that a portion of the underpayment was attributable to a gross valuation misstatement, an increased penalty of 40 percent under section 6662(h). Respondent has conceded, for the purposes of this case, th

For 1999, respondent determined a $12,769.70 deficiency and determined petitioner was liable for a $2,273.94 accuracy-related penalty under section 6662.1 For 2000, respondent determined a $9,503 deficiency and 1All section references are to the Internal Revenue Code in effect for the years at issue, and all Rule references are to the (continued...) -2- determined petitioner was liable for a $1,900.60 accuracy-related penalty under section 6662.

OPINION We must determine whether petitioners are liable.for 2001 for the accuracy-related penalty under section 6662(a) because of negligence under section 6662(b)(1) or a substantial understate- ment of tax under section 6662(b)(2).7 Section 6662(a) 1mposes an accuracy-related penalty equal to 20 percent of the underpayment to which section 6662 applies.

for our consideration is whether petitioner is liable for her taxable year 2001 for the accuracy- related penalty under section 6662(a). Pursuant to section 7491(c), respondent bears the burden of production with respect to the issue presented under section 6662. In order to meet respondent’s burden of production, respondent must come forward with sufficient evidence indicating that it is appropriate to impose the accuracy-related penalty in this case. Higbee v. Commissioner, 116 T.C. 438, 446 (

n this regard, we need not make any comments in addition to the comments that we made at the trial in these cases with respect to the parties’ respective experts and such experts’ respective reports. - 46 - We turn now to the issue presented under section 6662. Respondent determined that petitioners in each of these cases are liable for 1999 for the accuracy-related penalty under section 6662(a) because of a gross valuation misstatement under section 6662(h). In the alternative, respondent deter

Section 6662 imposes an accuracy-related penalty on the portion of an underpayment attributable to negligence or disregard of the rules or regulations. Sec. 6662(b)(1). The term “negligence” includes any failure to make a reasonable attempt to comply with the provisions of the internal revenue laws or to exercise ordinary and reasonable care in the

ence of the taxpayer, and the reliance on the advice of a professional, such as an accountant . Sec . 1 .6664-4(b)(1), Income Tax Regs . Respondent has the burden of production under section 7491(c) with respect to the accuracy-related penalty under section 6662 . To meet that burden, respondent must come forward with sufficient evidence indicating that it is appropriate to impose that penalty . Higbee v . Commissioner , 116 T .C . 438, 446 (2001) . Although respondent bears the burden of produc

--- MAJORITY --- Gerber, Chief Judge: Respondent determined a $178,168 income tax deficiency and a $56,537 accuracy-related penalty under section 6662 for petitioners’ 1999 taxable year.

Stern, for petitioners. Louis B. Jack and Kevin W. Coy, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION COLVIN, Judge: Respondent determined deficiencies in petitioners' Federal income tax and penalties as follows: Penalties Year Deficiency Sec. 6662 Sec. 6663 1995 $79,701 -- $58,241.25 1998 22,412 $2,187.80 48,376.50 1999 55,578 190.00 1,166.25 - 2 - After trial, respondent filed a motion for leave to file amendment to answer asserting increased deficiencies as a result of petitioners’

Whether Petitioners Are Liable for the Accuracy-Related Penalty A taxpayer is not liable for the accuracy-related penalty under section 6662·(a) and (b)(1) if there was reasonable cause for the underpayment and the taxpayer acted in good faith.

6662(d)(2)(A). Under section 7491(c), respondent has the burden of production with respect to the accuracy-related penalty under section 6662(a). To meet that burden, respondent must come forward with sufficient evidence to show that imposition of the penalty is appropriate. Higbee v. Commissioner, 116 T.C. 438, 446 (2001). We have sustained, or petitioners have conceded, the determinations in the notice that give rise to the deficiency that respondent determined. In addition, we have rejected p

irey, Jr., and Susan R. Fairey, pro se. Michael D. Zima, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION COLVIN, Judge: Respondent determined deficiencies in petitioners’ Federal income tax and penalties as follows: Penalties Year Deficiency Sec. 6662 Sec. 6663 1999 $3,456 $691.20 -- 2000 46,341 4,094.60 1$19,401 2001 3,566 713.15 -- 1 Respondent determined that petitioner William S. Fairey, Jr., is liable for the penalty for fraud with respect to part of the underpayment and that both p

The section 6662 accuracy-related penalty is inapplicable to the extent the taxpayer has reasonable cause and acted in good faith. Sec. 6664(c)(1). This determination is made considering all relevant facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. “Generally, the most important factor is the extent of the taxpayer’s effort to assess the

Section 6662 Accuracy-Related Penalty Section 6662 imposes an accuracy-related penalty upon any underpayment of tax resulting from negligence or disregard of the tax rules or regulations or from any substantial understatement of income tax. Negligence includes the failure of a taxpayer to keep proper records or to substantiate his reported expenses

ot substantiated the amount of the deduction nor shown that it became worthless in 1998. IV. Accuracy-Related Penalty We turn now to respondent’s determination in the deficiency notice that petitioner is liable for the accuracy-related penalty under section 6662. Respondent has the burden of production under section 7491(c) and must come forward with sufficient evidence that it is appropriate to impose the penalty. See Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). -13- Respondent determi

onal Tax Counsel, in Washington, D.C. 9(...continued) $211,407 adjustment for certain long-term capital gain that SMP did not pass through on its 1998 partnership tax return. Respondent does not seek to impose accuracy-related penalties pursuant to sec. 6662 with respect to this adjustment. - 14 - From approximately 1980 to 1995, Mr. Lerner worked for the law firm of O’Melveny & Myers, LLP. He worked in the firm’s Los Angeles office until 1986 or 1987, before leaving to head up the firm’s London

The accuracy-related penalty under section 6662 does not apply with respect to any portion of an underpayment for which there was reasonable cause and the taxpayer acted in good faith.

The section 6662 accuracy-related penalty is inapplicable to the extent the taxpayer has reasonable cause and acted in good faith. Sec. 6664(c)(1). This determination is made considering all relevant facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. “Generally, the most important factor is the extent of the taxpayer’s effort to assess the

Whether Petitioners Are Liable for the Accuracy-Related Penalty Respondent contends that petitioners are liable for the accuracy-related penalty under section 6662 for deducting $15,000 of their tuition.

- 2 - By notice of deficiency, respondent determined deficiencies in petitioners’ Federal income tax, additions to tax under section 6651(a), and accuracy-related penalties under section 6662 as follows: Additions to Tax/Penalties Sec.

That is because respondent determined that there was an understatement of $5,004,095 in petitioner's 1993 return that was attributable to - 21 - the foreign tax credits which petitioner claimed with respect to the $20 million dividend that it reported it received from ITC and that that understatement is substantial within the meaning of section 6662 (d) (1) (A) and (B) .

is devoid of evidence that any of the section 72(q)(2) exceptions apply. Respondent is sustained on this issue. The final issue is whether petitioners are liable for the 20-percent accuracy-related penalty for substantial understatement pursuant to section 6662.(a). Section 6662(a) imposes a penalty equal to 20 percent of the portion of an underpayment of tax attributable to a taxpayer's negligence, disregard of rules or regulations, or substantial understatement of income tax. Sec. 6662(a), (b

Respondent also determined that a section 6662 accuracy- related penalty is due with respect to petitioners' tax return for 1999. Section 6662(a) imposes a penalty of 20 percent of the portion of the underpayment attributable to negligence or disregard of rules or regulations. See sec. 6662(a) and (b)(1). Negligence is defined as any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code, and the term "disregard" includes any careless, reckless, or intent

, as applicable, on their 1994-96 Federal income tax returns. Held: Since P-H’s commodities trading activities do not constitute hedging transactions, gains and losses therefrom are capital in nature. Held, further, Ps are liable for penalties under sec. 6662, I.R.C., as determined by R. Bob A. Goldman, for petitioners. Lisa K. Hartnett, for respondent. - 2 - MEMORANDUM FINDINGS OF FACT AND OPINION HALPERN, Judge: By notice of deficiency dated January 22, 2001 (the notice of deficiency), respond

Accuracy-Related Penalty Section 6662 provides that a taxpayer may be liable for a penalty of 20 percent on the portion of an underpayment which is attributable to, among other things, substantial understatement of tax.8 The term “understatement” for that purpose means the excess of the amount of tax required to be shown on the return for the taxable year, over the amount

FACT AND OPINION GALE, Judge: Respondent determined the following deficiencies, addition to tax, and accuracy-related penalties with respect to petitioners’ Federal income taxes: - 2 - Addition to Tax and Penalties Year Deficiency Sec. 6651(a)(1) Sec. 6662 1990 $48,003.74 $2,399.77 $9,600.75 1991 61,322.84 -- 12,264.57 1992 72,370.56 -- 14,474.11 1993 104,589.15 -- 20,917.83 1994 42,916.12 -- 8,583.22 1995 25,817.51 -- 5,163.50 After concessions, the issues for decision are: (1) Whether petitio

Accuracy-Related Penalty Section 6662 imposes an accuracy-related penalty “equal to 20 percent of the portion of the underpayment” of tax attributable to “Any substantial understatement of income tax.” Sec.

Accuracy-related Penalty Finally, we consider whether petitioner is liable for the accuracy-related penalty under section 6662(a) for 1996 and 1997. Section 6662(a) and (b)(1) provides that if any portion of an underpayment of tax is attributable to negligence or disregard of rules or regulations, then there shall be added to the tax an amount equal to 20 percent of the amount of the underpayment that is so attributable. The term “negligence” includes any failure to make a reasonable attempt to

Subsection (a) of section 6662 imposes a penalty in an amount equal to 20 percent of the portion of any underpayment of tax attributable to causes specified in subsection (b).

We are satisfied from the testimony, however, that petitioners relied on the advice of Miller with respect to the passive activity losses that they claimed. We conclude that petitioners are not liable for the accuracy-related penalties imposed under section 6662. We have considered all of the remaining arguments that have been made by petitioners for a result contrary to that expressed herein, and, to the extent not discussed above, they are without merit. To reflect the foregoing, Decision will

l and Roberta L. Shumway, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION RUWE, Judge: Respondent determined deficiencies in income tax and a penalty in docket No. 14848-99 as follows: - 2 - Accuracy-Related Penalty Taxpayer Year Deficiency Sec. 6662 ha) Jean S. Ballantyne 1993 $4,998 -- Estate of Melvin W. 1994 10,735 -- Ballantyne, Jean S. Ballantyne, Surviving Spouse Estate of Melvin W. 1994 172,035 -- Ballantyne, Jean S. Ballantyne, Executrix Estate of Melvin W. 1995 14,562 $2,912 Ba

rental real estate - 7 - loss” claimed on the Schedule E because the Pepper Pike residence had not been “converted from personal use to use as an income- producing property”; (2) disallowed the medical expense deduction; and (3) determined that the underpayment of tax required to be shown on petitioner’s return is due to negligence and imposed a section 6662 accuracy-related penalty.

Under section 6662, an accuracy-related penalty of 20 percent is imposed on any portion of an understatement of tax attributable to negligence or to disregard of Federal rules or regulations. For purposes of section 6662(a), negligence constitutes a failure to make a reasonable attempt to comply with the Internal Revenue Code. Sec. 6662(c). The penalty u

By letter dated November 2, 2000, respondent determined a deficiency in petitioners’ 1996 income tax liability of $36,048 and an accuracy-related penalty under section 6662 (for negligence or disregard of rules or regulations) of $7,209.60.5 On January 16, 2001, petitioners filed their petition assigning error to respondent’s determinations.6 On March 19, 2001, respondent filed his answer denying that he had erred.

Accordingly, we hold that petitioner is not required to include in gross income the portion of the recovery attributable to the legal fees.4 Section 6662 Respondent determined an accuracy-related penalty under section 6662 on that part of petitioner's deficiency that was attributable to negligence or an intentional disregard of rules or regulations.

ndent determined the following deficiencies in, addition to, and accuracy-related penalties with respect to petitioners' Federal income taxes for taxable years 1995 and 1996: Accuracy-related Addition to Tax Penalties Year Deficiency Sec. 6651(a)(1) Sec. 6662 1995 $72,792 $11,258 $12,968.00 1996 17,658 -– 3,531.60 - 2 - Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practi

OPINION OF THE SPECIAL TRIAL JUDGE CARLUZZO, Special Trial Judge: Respondent determined a deficiency of $8,922 in petitioner’s 1993 Federal income tax and a section 6662 penalty of $1,784.

a civil tax penalty should be assessed against the Taxpayers based on their receipt of tip income, a fair reading of recent case law clearly establishes that the Petitioners should (at the most) only be subject to the negligence penalty under Code Section 6662. Neither petitioner testified why he or she thought that the income (whether hourly compensation or tip income) was not subject to tax. For that matter, neither petitioner even testified that he or she thought any category or specific ite

Accuracy-Related Penalty — Section 6662 Respondent determined that petitioners are liable for the year at issue for the accuracy-related penalty under section 6662(a).

under consideration; and (12) whether the doctrine of double jeopardy, res judicata, or collateral estoppel bars assessment for any of the years at issue. 4 Pursuant to sec. 6664(b), the penalties for fraud under sec. 6663 and for negligence under sec. 6662 as determined in the notice of deficiency do not apply for 1989 because petitioner filed no return for that year. Rather the issue is whether the penalty under sec. 6651(f) for fraudulent failure to file is applicable for 1989. In the other

under consideration; and (12) whether the doctrine of double jeopardy, res judicata, or collateral estoppel bars assessment for any of the years at issue. 4 Pursuant to sec. 6664(b), the penalties for fraud under sec. 6663 and for negligence under sec. 6662 as determined in the notice of deficiency do not apply for 1989 because petitioner filed no return for that year. Rather the issue is whether the penalty under sec. 6651(f) for fraudulent failure to file is applicable for 1989. In the other

ed that the $81,000 did not constitute taxable compensation and the parties have made various concessions, they will have to determine in their Rule 155 computations whether Paul or Lorna has an underpayment of tax so that the additions to tax pursuant to sections 6651(a)(1) and 6654 still apply to Paul and the accuracy-related penalty pursuant to section 6662 still applies to Lorna.

Petitioners bear the burden of proving that section 6662 does not apply.

A penalty is imposed under section 6662 equal to 20 percent of the part of the underpayment which is attributable to negligence or disregard of rules or regulations.

Accuracy-Related Penalty Section 6662 authorizes the imposition of an accuracy- related penalty equal to 20 percent of the portion of an underpayment attributable to, among other things, negligence or disregard of rules or regulations.

Adequate disclosure for purposes of section 6662 is made in one of two ways.

- 16 - Section 6662(a) The final issue is whether petitioners are liable for a penalty under section 6662. Section 6662(a) imposes a 20-percent penalty on the portion of an underpayment of tax that is attributable to, inter alia, any substantial understatement of income tax. A substantial understatement of tax is defined as the amount which exceeds the greater of 10 percent of the tax required to be shown on the return for the taxable year or $5,000. See sec. 6662(d)(1)(A). An understatement is

Pursuant to section 6664(c)(1), a section 6662 penalty does not apply to any portion of an underpayment if reasonable cause existed and the taxpayers acted in good faith.

Penalties The last issue is whether petitioner is liable for the penalties determined by respondent pursuant to section 6662(a), (g), (h)(1), and (2)(C). A substantial estate tax valuation understatement occurs if the value of property claimed on a return is 50 percent or less of the amount determined to be its correct value, and the portion of the underpayment attributable to the understatement exceeds $5,000. See sec. 6662(g). The penalty equals 20 percent of the portion of the underpayment at

Petitioners, not respondent, have the burden of proving that respondent's determinations in the notice, including the de- terminations under section 6662, are erroneous.

lliam L. Blagg and Mark S. Mesler, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION WELLS, Judge: Respondent determined deficiencies in petitioners Federal income tax and accuracy-related penalties as follows: - 2 - Penalties Year Deficiency Sec. 6662 1991 $3,009,338 $601,868 1992 1,704,166 340,833 1993 605,629 121,125 Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of

Section 6662 Penalty For petitioners' 1992 tax year, respondent determined that petitioners are liable for the section 6662(b)(2) penalty for the substantial understatement of tax, or in the alternative, for the section 6662(b)(1) penalty for negligence or disregard of the rules or regulations. Respondent's determinations are presumed correct, and

Whether petitioner is liable for penalties for negligence under section 6662 for 1993 and 1994.

petitioners. John J. Boyle, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION GALE, Judge: Respondent determined the following deficiencies and accuracy-related penalties with respect to petitioners’ Federal income tax: Penalty Year Deficiency sec. 6662 1993 $8,471 $1,694 1994 7,366 1,473 - 2 - Unless otherwise noted, all section references are to the Internal Revenue Code in effect for the years in issue. All Rule references are to the Tax Court Rules of Practice and Procedure. All dollar

Melanie M. Garger, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION COLVIN, Judge: Respondent determined deficiencies in petitioners' 1992 and 1993 Federal income tax and an accuracy- related penalty as follows: Penalty under Year Deficiency Sec. 6662 1992 $194,121 $38,824 1993 133,807 26,761 - 2 - After concessions, the issues for decision are: 1. Whether petitioner operated his horse racing and breeding activity for profit in 1992 and 1993. We hold that he did not. 2. Whether petitione

Accuracy-Related Penalty Respondent determined an accuracy-related penalty under section 6662 in the amount of $7,922, based on the determination that petitioners’ underpayment was attributable to a “substantial understatement of income tax” within the meaning of section 6662(d).

Whether petitioner is liable for the accuracy-related penalty for substantial understatement under section 6662 for fiscal years 1992 and 1993.

--- MAJORITY --- OPINION Wells, Judge: Respondent determined deficiencies in petitioners’ income taxes of $60,371, $14,884, $6,875, and $20,173 for their 1988, 1991, 1992, and 1993 taxable years, respectively, and additions to tax pursuant to section 6662 of $2,977, $1,375, and $4,035 for their 1991, 1992, and 1993 taxable years, respectively.

owned by decedent on the valuation date; (3) the amount of the section 2056 marital deduction to be allowed the estate of decedent (petitioner); and (4) whether petitioner is liable for the section 6662 penalties as determined by respondent.

Pursuant to section 6664(c)(1), a section 6662 penalty does not apply to any portion of an underpayment if reasonable cause existed and the taxpayers acted in good faith.

The accuracy-related penalty of section 6662 does not apply with respect to any portion of an underpayment if it is shown that there was reasonable cause for such portion and the taxpayer acted in good faith with respect to such portion.

Furthermore, regulations promulgated under section 6662, section 1.6662-4(f), Income Tax Regs., provide the following methods for making adequate disclosure: (f) Method of making adequate disclosure-- (1) Disclosure statement.

Addition to Tax and Penalties The final issue is whether Jacobs is liable for an addition to tax for negligence or disregard of rules or regulations under section 6653(a)(1) for taxable year 1988; and whether Jacobs is liable for accuracy-related penalties under section 6662 for negligence or disregard of rules or regulations, any substantial understatement of income tax, and/or any substantial valuation overstatement for taxable years 1989 and 1990.

Section 6662 Penalties . . . . . . . . . . . . . . . 156 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . 164 - 3 - MEMORANDUM FINDINGS OF FACT AND OPINION GERBER, Judge: Respondent determined deficiencies in income tax and penalties for petitioners' 1990, 1991, and 1992 taxable years as follows: Additions to Tax Sec Sec. Year Deficien

Whether Petitioner Is Liable for the Accuracy-Related Penalty Under Section 6662 Respondent determined that petitioner is liable for the accuracy-related penalty for negligence for 1991 and for substantial understatement for 1992.

- 17 - Section 6662 imposes a penalty equal to 20 percent of the part of the underpayment of tax that is attributable to negligence. Sec. 6662(a) and (b)(1). For purposes of section 6662, negligence is a failure to reasonably attempt to comply with the provisions of the Internal Revenue Code. Sec. 6662(c). Negligence is defined as "'lack of due care or fa

The section 6662 accuracy-related penalty does not apply with respect to any portion of an underpayment if reasonable cause exists for the underpayment and the taxpayer acted in good faith with respect to such portion. Sec. 6664(c)(1). The determination of whether the taxpayer acted with reasonable cause and in good faith depends upon the pertinent fac

Section 6662 Penalties . . . . . . . . . . . . . . . 163 Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . 171 MEMORANDUM FINDINGS OF FACT AND OPINION GERBER, Judge: Respondent determined deficiencies in income tax and penalties for petitioners’ 1990, 1991, and 1992 taxable years as follows: Additions to Tax Sec. Sec. Year Deficiency 666

Addition to Tax and Penalties The final issue is whether Jacobs is liable for an addition to tax for negligence or disregard of rules or regulations under section 6653(a)(1) for taxable year 1988; and whether Jacobs is liable for accuracy-related penalties under section 6662 for negligence or disregard of rules or regulations, any substantial understatement of income tax, and/or any substantial valuation overstatement for taxable years 1989 and 1990.

The section 6662 accuracy-related penalty does not apply with respect to any portion of an underpayment if reasonable cause exists for the underpayment and the taxpayer acted in good faith with respect to such portion. Sec. 6664(c)(1). The determination of whether the taxpayer acted with reasonable cause and in good faith depends upon the pertinent fac

Section 6662(a) Taxpayers are liable for a penalty under section 6662 equal to 20 percent of the part of the underpayment which is attributable to negligence.

explaining the late filing of her 1993 return. Accordingly, we hold that petitioner is liable for the section 6651 addition to tax. Accuracy-Related Penalty Respondent determined that petitioner is liable for an accuracy-related penalty pursuant to section 6662. Section 6662(a) imposes a 20-percent penalty on the portion of an underpayment of tax that is attributable to, inter alia, negligence or disregard of rules or regulations. The term "negligence" includes any failure to make a reasonable

Here it is clear that petitioners made a good faith effort and acted reasonably and prudently in attempting to comply with section 6662 by supplying their certified public accountant with all the information necessary to correctly report the item subject to adjustment.

Addition to Tax and Penalties The final issue is whether Jacobs is liable for an addition to tax for negligence or disregard of rules or regulations under section 6653(a)(1) for taxable year 1988; and whether Jacobs is liable for accuracy-related penalties under section 6662 for negligence or disregard of rules or regulations, any substantial understatement of income tax, and/or any substantial valuation overstatement for taxable years 1989 and 1990.

caster, for petitioners. Clinton M. Fried, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION COLVIN, Judge: Respondent determined deficiencies in petitioners' 1991 and 1992 Federal income tax and an accuracy- related penalty as follows: - 2 - Sec. 6662 Year Deficiency Penalty 1991 $11,611 $2,322.20 1992 16,818 3,363.60 Petitioners owned an antique store during the years in issue. Petitioners also owned a 52-acre farm on which they bred and trained quarter horses and held three rodeos durin

Section 6662(a) Taxpayers are liable for a penalty under section 6662 equal to 20 percent of the part of the underpayment which is attributable to negligence.

ristine M. Sergeant, pro sese. Michael P. Breton, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION VASQUEZ, Judge: Respondent determined the following deficiencies in, and penalty on, petitioners' Federal income taxes: Penalty Year Deficiency Sec. 6662 1993 $2,852 -- 1994 10,402 $2,080 - 2 - All section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. The issues for decision are: (1)

The section 6662 accuracy-related penalty does not apply with respect to any portion of an underpayment if reasonable cause exists for the underpayment and the taxpayer acted in good faith with respect to such portion. Sec. 6664(c)(1). The determination of whether the taxpayer acted with reasonable cause and in good faith depends upon the pertinent fac

The section 6662 accuracy-related penalty does not apply with respect to any portion of an underpayment if reasonable cause exists for the underpayment and the taxpayer acted in good faith with respect to such portion. Sec. 6664(c)(1). The determination of whether the taxpayer acted with reasonable cause and in good faith depends upon the pertinent fac

Taxpayers are liable for a penalty equal to 20 percent of the part of the underpayment to which section 6662 applies.

Petitioner bears the burden of proving that respondent's imposition of a penalty under section 6662 is erroneous.

The section 6662 accuracy-related penalty does not apply with respect to any portion of an underpayment if reasonable cause exists for the underpayment and the taxpayer acted in good faith with respect to such portion. Sec. 6664(c)(1). The determination of whether the taxpayer acted with reasonable cause and in good faith depends upon the pertinent fac

The section 6662 accuracy-related penalty does not apply with respect to any portion of an underpayment if reasonable cause exists for the underpayment and the taxpayer acted in good faith with respect to such portion. Sec. 6664(c)(1). The determination of whether the taxpayer acted with reasonable cause and in good faith depends upon the pertinent fac

Section 6662 imposes a penalty equal to 20 percent of the portion of an underpayment of tax that is attributable to "negligence or disregard of rules or regulations." Sec. 6662(a) and (b)(1). The term "negligence" includes "any failure to make a reasonable attempt to comply with the provisions of this title," and the term "disregard" includes "any

mony." Accuracy-related Penalty--Section 6662(a) With respect to each of petitioners' taxable years in issue, respondent determined that the entire underpayment for each taxable year was due to "negligence or disregard of rules or regulations" under section 6662. On brief, respondent conceded that "the accuracy-related penalty under section 6662(a) for negligence does not apply to the adjustments made relative to the issue of whether the attorney fees and automobile payments constitute alimony o

Accuracy-related Penalty Under Section 6662 Respondent determined an accuracy-related penalty of $28,170 under section 6662(a) for taxable year ended July 31, 1990.

The accuracy-related penalty of section 6662 does not apply to any portion of an underpayment if it is shown that there was reasonable cause for such portion and the taxpayer acted in good faith with respect thereto.

Section 6662 Penalty Section 6662(a) imposes a penalty of 20 percent of the portion of an underpayment attributable to one or more of the items set forth in section 6662(b), including negligence or disregard of rules or regulations. See sec. 6662(b)(1). Negligence is defined as the lack of due care or failure to do what a reasonable and ordinarily

(2) Whether petitioner is liable for the section 6662 accuracy- related penalty for a substantial understatement of income tax for 1990.

e deductions; (4) whether petitioner is entitled to claim his mother and his father as his dependents; (5) whether petitioner is entitled to head of household filing status; and (6) whether petitioner is liable for the accuracy-related penalty under section 6662. FINDINGS OF FACT Some of the facts have been stipulated, and the stipulated facts are incorporated in our findings by this reference. At the time the petition was filed, petitioner resided in Washington, D.C. During the first 6 months o

Respondent determined that petitioners are liable for section 6662 accuracy- related penalties for 1989, 1990, and 1991.

OPINION SCOTT, Judge: Respondent determined deficiencies in petitioners' Federal income taxes and additions to tax for the taxable years 1990 and 1991 as follows: - 2 - Additions to Tax and Accuracy-Related Penalties Year Deficiency Sec. 6651(a)(1) Sec. 6662 1990 $29,155 $7,988 $5,831 1991 55,873 11,730 11,175 Some of the issues were conceded or settled by the parties. The issues presented for decision are: (1) Whether petitioners are entitled to casualty loss deductions for the taxable year 199

Section 6662 imposes a 20-percent penalty on any portion of any underpayment that is attributable to any substantial understatement of income tax. Sec. 6662(a)(2), 8Sec. 72(b) provides in pertinent part: SEC. 72(b). Exclusion Ratio.-- (1) In general.-- Gross income does not include that part of any amount received as an annuity under an annuity, en

Section 6662 imposes a penalty equal to 20 percent of the portion of an underpayment of tax that is attributable to any substantial understatement of tax. Sec. 6662(a) and (b)(2). An understatement of tax is substantial when it exceeds the greater of 10 percent of the tax required to be shown on the return or $5,000. Sec. 6662(d)(1)(A). The amount

Taxpayers are liable for a penalty equal to 20 percent of the part of the underpayment to which section 6662 applies.

, 1997. Bruce K. Remy, pro se. William F. Castor, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION WHALEN, Judge: Respondent determined the following deficiencies in, and penalties on, petitioners’ income taxes: - 2 - Penalty Year Deficiency Sec. 6662 1990 $470 $270 1991 4,345 1,114 1992 5,320 1,428 All section references are to the Internal Revenue Code, as in effect during the years in issue. We are called upon to decide three questions: First, whether petitioners can deduct the value o

Section 6662's accuracy-related penalty does not apply to any portion of an underpayment to the extent that an individual has reasonable cause for that portion and he or she acts in good faith with respect thereto. Sec. 6664(c)(1). Such a determination is made by taking into account all facts and circumstances, including the experience and knowledg

Petitioners argue that section 6662 was first effective for tax years beginning after December 31, 1989.

The penalty under section 6662 does not apply to any part of an underpayment for which there was reasonable cause and the taxpayer acted in good faith.

Respondent determined that petitioners are liable for the accuracy-related penalty pursuant to section 6662(a). Section 6662 imposes a penalty equal to 20 percent of the portion of an underpayment of tax that is attributable to any substantial understatement of tax. Secs. 6662(a) and (b)(2). An understatement of tax is substantial whe

Ordinarily, section 6662 does not apply to tax years for which the return is due before December 31, 1989.

of Practice and Procedure. The issues to be decided are as follows: 1. Whether petitioners engaged in a horse breeding activity with an actual and honest profit objective; and 2. whether petitioners are liable for penalties on income tax pursuant to section 6662. FINDINGS OF FACT Some of the facts have been stipulated for trial pursuant to Rule 91. The parties' stipulations of fact are incorporated herein by reference and are found as facts in the instant case. At the time they filed their petit

The section 6662 accuracy-related penalty does not apply with respect to any portion of an underpayment if it is shown that there was reasonable cause for such portion and that petitioners acted in good faith with respect to such portion. Sec. 6664(c)(1). The determination of whether petitioners acted with reasonable cause and in good faith depends upo

Taxpayers are liable for a penalty equal to 20 percent of the portion of the underpayment to which section 6662 applies.

Taxpayers are liable for a penalty equal to 20 percent of the part of the underpayment to which section 6662 applies.

Section 6662 imposes a penalty equal to 20 percent of the portion of an underpayment that, among other things, is a substantial understatement of income tax. An understatement of income is substantial if it exceeds the greater of 10 percent of the tax required to be shown on the return or $5,000. Sec. 6662(d)(1). The deficiencies here determined ar

990 as follows:1 1 Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the taxable years at issue. All Rule references are to the Tax Court Rules of Practice and Procedure. - 2 - Penalty Year Deficiency Sec. 6662 1989 $6,313 $1,263 1990 17,439 3,488 After concessions by both parties, the issues for decision are: (1) Whether petitioner failed to report income for 1989 and 1990 in the amounts of $7,439 and $36,663, respectively; and (2) whether petitio

6662 1988 $23,444.18 $1,172.21 $5,861.00 --- 1989 4,473.00 --- --- $894.60 - 2 - Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. After concessions, the issues for decision are: (1) Whether petitio

MEMORANDUM FINDINGS OF FACT AND OPINION WELLS, Judge: Respondent determined a deficiency of $20,343 in petitioners' 1990 Federal income tax, an addition to tax pursuant to section 6651(a)(1) of $936, and an accuracy-related penalty pursuant to section 6662 of $4,069.

mpex, (3) whether individual petitioners are liable for additions to tax under sections 6653 and 6661 for 1987 and 1988 attributable to the constructive dividends, (4) whether individual petitioners are liable for an accuracy-related penalty under section 6662 for 1989, (5) whether corporate petitioner is liable for an addition to tax under section 6653(a)(1)(A) and (B) for taxable year ending March 31, 1988, (6) whether corporate petitioner is liable for an addition to tax under section 6661 fo

3. Whether Beverly is liable for an addition to tax for the failure to file a return, as determined by respondent under section 6651(a)(1). We hold it is not. 4. Whether MIC is liable for the accuracy related penalties determined by respondent under section 6662. We hold it is to the extent described herein. 5. Whether Beverly is liable for the negligence addition to tax determined by respondent under section 6653(a). We hold it is not. Unless otherwise stated, section references are to the Inte

OPINION PARR, Judge: Respondent determined deficiencies in, and penalties on, the Federal income tax for 1989, 1990, and 1991 of Carl E. Jones (petitioner) and Elaine Y. Jones (Mrs. Jones) as follows: -2- Accuracy-Related Penalties Year Deficiency Sec. 6662 1989 $210,819 $42,164 1990 125,150 25,030 1991 90,018 18,004 All section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure, unless other

6662 1988 $15,059 $753 $3,560 --- 1989 79,636 --- --- $15,927 Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. After concessions by the parties, the issues for decision are: (1) Whether petitioner A

Section 6662 Respondent determined that petitioners are liable for each of the years 1989 and 1990 for the accuracy-related penalty under section 6662(a) because their underpayment of tax for each of those years was due to negligence or disregard of rules or regu- lations. For purposes of section 6662(a), the term "negligence" includes any failure

Also in dispute is the section 6662 accuracy-related penalty.

Section 6662 Substantial Understatement Penalty Respondent determined that petitioners are liable for the section 6662(a) penalty for 1990. Petitioners argue that there was substantial authority for the position taken on their return. Furthermore, petitioners argue that the complexity of the matter - 16 - and the prior inconsistent positions of re

for 1 Unless otherwise indicated, section references are to the Internal Revenue Code in effect for the years at issue, and Rule references are to the Tax Court Rules of Practice and Procedure. - 3 - accuracy-related penalties for negligence under section 6662. We hold that it is liable. Some of the facts have been stipulated and are so found. The stipulation of facts and joint exhibits attached thereto are incorporated herein by this reference. Issue 1: Compensation Background Petitioner was in

Consequently, the issues for decision are: (1) Whether petitioners are entitled to a deduction for a long-term capital loss sustained in connection with the sale of a horse; and (2) whether the underpayment of petitioners' 1990 Federal income tax was due to negligence so as to render them liable for the accuracy-related penalty under section 6662 for that year.

Section 6662 Substantial Understatement Respondent determined that petitioners are liable for the section 6662(a) penalty for 1990. Section 6662(a) imposes an accuracy-related penalty in an amount equal to 20 percent of the underpayment of tax attributable to one or more of the items set forth in section 6662(b). In the notice of deficiency, respon

This Court has indicated that a taxpayer may satisfy the requirements of adequate disclosure for purposes of section 6662 if he provides sufficient facts on the face of his return that enable the Commissioner to identify the potential controversy involved.

dividends; whether a $100,000 home interest deduction claimed by - 3 - Georgiou in 1990 can be recharacterized as a business interest expense under section 163(a); whether ownership of JAI stock was transferred from Georgiou to Kolonaki during 1989 or 1990, creating a dividend under section 304; and whether Georgiou is liable for penalties under section 6662 for 1989 and 1990.

dividends; whether a $100,000 home interest deduction claimed by - 3 - Georgiou in 1990 can be recharacterized as a business interest expense under section 163(a); whether ownership of JAI stock was transferred from Georgiou to Kolonaki during 1989 or 1990, creating a dividend under section 304; and whether Georgiou is liable for penalties under section 6662 for 1989 and 1990.

Taxpayers are liable for a penalty equal to 20 percent of the part of the underpayment to which section 6662 applies.

dividends; whether a $100,000 home interest deduction claimed by - 3 - Georgiou in 1990 can be recharacterized as a business interest expense under section 163(a); whether ownership of JAI stock was transferred from Georgiou to Kolonaki during 1989 or 1990, creating a dividend under section 304; and whether Georgiou is liable for penalties under section 6662 for 1989 and 1990.

FACT AND OPINION LARO, Judge: In separate notices ofdeficiency, respondent determined deficiencies in petitioners' Federal income tax and related accuracy-related penalties for 2007 as follows: -2- [*2] Accuracy-relatedpenalty Petitioner Deficiency sec. 6662 Andrea M. Rodriguez $24,701 $4,940 Zavra D. Rodriguez 22,228 4,445 Petitioners, while residing in California, petitioned this Court for a redetermination oftheir deficiencies and penalties. The parties were able to resolve a number ofissues

FACT AND OPINION LARO, Judge: In separate notices ofdeficiency, respondent determined deficiencies in petitioners' Federal income tax and related accuracy-related penalties for 2007 as follows: -2- [*2] Accuracy-relatedpenalty Petitioner Deficiency sec. 6662 Andrea M. Rodriguez $24,701 $4,940 Zavra D. Rodriguez 22,228 4,445 Petitioners, while residing in California, petitioned this Court for a redetermination oftheir deficiencies and penalties. The parties were able to resolve a number ofissues

Accuracy-Related Penalties Respondent also determined that petitioner is liable under section 6662 (a) for accuracy-related penalties for tax years 1998 and 1999 .

NDUM FINDINGS OF FACT AND OPINION COLVIN, Judge: Respondent determined deficiencies in petitioner’s Federal income tax and additions to tax and penalties as follows: - 2 - Additions to tax and penalties Year Deficiency Sec. 6653(a) Sec. 6651(a)(1) Sec. 6662 1987 $1,197,033 $63,143.55 $269,331.98 -- 1988 274,146 16,379.00 61,682.50 -- 1989 10,253 -- 2,307.20 $2,050.60 1990 112,208 -- 25,247.25 22,441.60 1992 82,632 -- 18,592.68 16,526.40 1993 1,774 -- -- 354.80 1994 17,581 -- -- 3,516.20 1995 19,

Whether petitioner is liable for the accuracy-related penalty under section 6662 for 1993-95.

To the extent that a computation under Rule 155 indicates that a substantial underpayment of tax within the meaning of section 6662 exists, then we sustain respondent’s determination.

To the extent that a computation under Rule 155 indicates that a substantial underpayment of tax within the meaning of section 6662 exists, then we sustain respondent’s determination.

UBI. - 12 - 6,842 shares of the pledged stock. Without an amount realized, petitioners did not have a gain.11 See sec. 1001(a). To reflect the foregoing, Decision will be entered for petitioners. 11 Therefore, we need not decide whether petitioners are entitled to a deduction for this transfer or whether they are liable for a penalty pursuant to sec. 6662.

Whether Petitioners Are Liable for the Accuracy-Related Penalty for Substantial Understatement Under Section 6662 Petitioners contend that they are not liable for the accuracy-related penalty under section 6662 because they properly relied on their accountant and because the transaction was complex.

Section 6662 imposes an accuracy-related penalty equal to 20 percent of any portion of an understatement attributable to negligence or disregard of rules or regulations or substantial understatement of tax. “Negligence” means any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code, and “disregard” means a

blish the existence, amount, or worthlessness in the years at issue of claimed nonbusiness and business bad debts. P has also failed to substantiate itemized deductions disallowed by R. P is liable for accuracy-related penalties for negligence under sec. 6662, I.R.C. Robert N. Bedford and Bruce G. Kaufmann, for petitioners. Charles A. Baer, for respondent. MEMORANDUM OPINION LARO, Judge: Richard T. and Miriam Stanley petitioned the Court to redetermine 1992 through 1994 income tax deficiencies o

Accuracy-Related Penalty Under Section 6662 Respondent determined that petitioner was liable for the accuracy-related penalty for negligence under section 6662(a) and (c) for 1990 and 1991.

for its clients. We have rejected the factual basis of petitioners’ claim, and, thus, what authority they cite is not relevant to the facts of this case and cannot constitute 5 Respondent determined an alternative basis for the penalties imposed by sec. 6662 on account of negligence or disregard of rules and regulations. See sec. 6662(a) and (b). Respondent failed to address that alternative basis on brief, so we will assume that respondent has abandoned that alternative. See Bernstein v. Commi

Overview Section 6662 provides that a taxpayer may be liable for a 20-percent accuracy-related penalty on the portion of an understatement of income tax attributable to (among other things) negligence or disregard of rules or regulations or a substantial understatement of income tax.

MEMORANDUM FINDINGS OF FACT AND OPINION GERBER, Judge: Respondent determined an $81,679 income tax deficiency for petitioner’s tax year ended May 31, 1993, a $6,082 - 2 - section 6651(a)(1)1 addition to tax, and a $16,366 section 6662 penalty.

This means that it would have the same meaning where it appears in section 6662(a), and would have the same impact on those of the section 6662 additions that apply to the estate tax.

L. Baker, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION WHALEN, Judge: Respondent determined that petitioner is liable for the following deficiency, addition to tax, and penalty for 1990: Addition to Tax Penalty Deficiency Sec. 6651(a)(1) Sec. 6662 $26,206 $9,155 $5,241 - 2 - Unless stated otherwise, all section references are to the Internal Revenue Code as amended and in effect during 1990. After concessions by petitioner, the issues for decision are: (1) Whether petitioner is entit

Also, the notice of deficiency determined that an accuracy-related penalty under section 6662 applies; the parties agree that a penalty applies “if the Court determines that there is ‘an underpayment of tax required to be shown on the return’ within the meaning of I.R.C.

ngly increased the taxable estate by $495,968. In addition, respondent determined the underpayment arising from undervaluation of the FABG stock was attributable to fraud or, in the alternative, negligence or disregard of rules or regulations under section 6662. With respect to decedent's farm land, respondent determined that the fair market values on the alternate valuation date were as follows: Parcel 1 $308,544 Parcel 2 214,368 Parcel 3 209,936 Parcel 4 172,876 Parcel 5 26,000 Total 931,724 R

The IRS determined a 40% penalty for a gross val- uation misstatement and (in the alternative) a 20% penalty under the provisions of section 6662 mentioned above.

MEMORANDUM FINDINGS OF FACT AND OPINION WELLS, Judge: Respondent determined for tax year 2008 a deficiency in tax of $44,056 and a section 66621 penalty of $8,811, and for tax year 2009 a deficiency in tax of $28,541 and a section 6662 penalty of $5,708.

It immunizes him against section 6662 penalties related to the depreciation deductions that he took in reliance on BDO’s studies.

It immunizes him against section 6662 penalties related to the depreciation deductions that he took in reliance on BDO’s studies.

In the case of a partnership, a penalty under section 6662 applies when the partnership takes a return position that is negligent or that might create a substantial understatement of tax at the partner level.

Valuation misstatement penalties Section 6662(a) and (b)(3) imposes an accuracy-related penalty equal to 20% ofthe portion ofan underpayment oftax "attributable to * * * [a]ny substantial valuation misstatement under chapter 1." For purposes ofsection 6662, "a substantial valuation misstatement under chapter 1" exists if"the value of any property (or the adjusted basis ofany property) claimed on any return oftax imposed by chapter 1 is 150 percent or more ofthe amount determined to be the correc

n the well-worn tax-protester arguments that this Court has rejected time and again. OPINION The issues before the Court are whether the income the Jagoses received is taxable and whether the Jagoses are liable for the accuracy-related penalty under section 6662. The Jagoses bear the burden ofproofand must produce credible evidence that they are not liable for the tax deficiency determined by the Commissioner.2 The Jagoses conceded that they received the income and failed to offer any credible e

Section 6662 imposes the penalty when there is "any substantial understatement ofincome tax." Sec. 6662(b)(2). Here the 3 The Commissioner has his own theory on how Bulakites calculated his carryover and where it really came from, but we need not analyze it. - 9 - [*9] Commissioner met his burden ofproduction with math. An understatement oftax is

The Commissioner bears the burden ofproduction with respect to a section 6662 penalty.

0% ofthe tax required to be shown on the return or $5,000. Sec. 6662(d)(1)(A). The McGuires' understatement is $7,092, which meets this threshold. The Commissioner has met his burden. Section 6664 provides a defense to the underpayment penalty under section 6662. The McGuires can escape the penalty ifthey can show that they had reasonable cause for the underpayment and that they acted in good faith. See sec. 6664(c)(1). The regulation provides that "the determination ofwhether a taxpayer - 16 -

dealt with section 6662 accuracy-relatedpenalties, we have applied its tripartite analysis to section 6651 additions to tax as well.

Penalties Section 6662 imposes an accuracy-relatedpenalty ifany part ofan under- payment oftax required to be shown on a return is due to negligence, a substantial understatement ofincome tax, or a substantial valuation misstatement.

In his pretrial memorandum respondent indicated that he intended to file a motion for leave to amend the answer to assert under section 6662 a 20% accuracy-related penalty for a substantial understatement ofincome tax.

income tax for tax year 2001 on the basis oftheir amended 2001 Federal income tax return. R further determined an addition to tax under I.R.C. sec. 6651(a)(1) for failure to timely file the original 2001 return and an accuracy- related penalty under I.R.C. sec. 6662. In an amendment to answerR asserted, for the first time, a gross valuation misstatementpenalty under I.R.C. sec. 6662. The parties settled all issues related to the deficiency except one: On their original return Ps claimed zero bas

Section 6662 Accuracy-RelatedPenalty Respondent determined a section 6662(a) penalty for petitioner's 2011 tax year. Section 6662(a) and (b)(1) and (2) imposes a 20% accuracy-relatedpenalty on any underpayment ofFederal income tax attributable to, among other things, a taxpayer's negligence or disregard ofrules or regulations, or a substantial unde

As explained herein, we sustain the determined deficiency SERVED JUN 1 0 2014 -2- [*2] and the related section 6662¹ accuracy-relatedpenalty, and we also hold that possible deductions first raised at trial are not allowable to offsetthe adjustments in the notice ofdeficiency.

ts had no value. He also found that petitioners had understated their gain on the property sale because they had overstated their basis in the property. Finally, respondent determined that petitioners were liable for accuracy-related penalties under section 6662. After concessions, the issues remaining for decision are: (1) whether the charitable contribution deductions petitioners claimed for granting conservation easements to NAT exceeded the fair market values of the easements. We hold they d

We hold that Fountain is not liable; (17) whether Fountain is liable for penalties pursuant to section 6662 for the quarters ended March 31, 1999, through December 31, 2003.

OPINION Section 6662(a) states “[i]f this section applies to any portion of an underpayment of tax required to be shown on a return, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which this section applies.” Section 6662 applies to the portion of any underpayment which is attributable to negligence or disregard of rules or regulations or any substantial understatement of income tax.

Graev are liable for accuracy-related penalties under section 6662 for 2004 and 2005.

Colvin is entitled to decrease the Schedule C gross receipts for 1997 by $97, 497, and whe her petitioners are entitled to decrease the Schedule C gross receipts for 1999 by $532, 741; (3) whether petitioners are entitled to án additional depreciation deduction of $55,648 for 1999; and (4) whether petitioners are liable for t e section 6662 (a) penalty for 1998 and 1999.3 FINDINGS OF FACT The parties have stipulated some of the facts, which we incorporate in our findings by this reference.

On April 14, 2008, Arizona Media submitted Form 870-AD, Offer to Waive Restrictions on Assessment and Collection ofTax Deficiencyand to Accept Overassessment, to the IRS, accepting a deficiency in income tax of$13,494,884 and a penaltypursuant to section 6662 of$2,698,997.

Ifnot, respondent will have failed to meet his burden ofproduction under section 7491(c) with respect to the section 6662 penalty for a substantial understatement.

471, wherein we applied the guid pro quo standard.4 In Rolfs we held the taxpayers had not made a charitable contribution because they received a substantial benefit in the form ofdemolition services, the value ofwhich exceeded the value ofthe interest in the house donated. We did not decide whether section 170(f)(3) applied. Given all the facts and circumstances, including the uncertain state ofthe law, we find that petitioners acted with reasonable cause and in good faith. Therefore, we hold t

Hawk, Jr., GST Exempt Marital Trust, Nancy Sue Hawk and Regions Bank, cotrustees; and Nancy Sue Í4awk are each liable as transferees for the 2003 Federal income tax liability ofHoliday Bowl, Inc., of$965,358 and penalties pursuant to section 6662 b) and (h) of$8,035 and $370,072, respectively.

entitled to miscellaneous other deductions of$1,106,497, $468,938, and $304,718 for 2003, 2004, and 2005, respectively; (7) whether petitioner is liable for withholding tax under sections 14423 and 1461 of$80,100, $90,000, and $90,000 for 2003, 2004, and 2005, respectively; and (8) whether petitioner is liable for accuracy-related penalties under section 6662 for 2003, 2004, and 2005.

For purposes ofsection 6662, the term "negligence" includes any failure to make a reasonable attempt to comply with the income tax provisions ofthe Code.

Respondent also determined penalties under section 6662 of $55,314 and $111,245 for 2001 and 2002, respectively, as well as additions to tax under section 6551(a) (1) of $1,995, $11,820, $74, and $41,486 for 1997, 1998, 1999, and 2001, respectively.

required by section 170(f)(8). If we find that petitioner made a qualified conservation contribution and that she substantiated it, we then must determine its value. Finally, we must determine whether petitioner is liable for certain penalties under section 6662. I. Qualified Conservation Contribution A taxpayer is generally allowed a deduction for any charitable contribution made during the taxable year. Sec. 170(a)(1). A charitable contribution is a gift of property to a charitable organizatio

--- MAJORITY --- OPINION Dawson, Judge: Petitioners petitioned the Court for redetermination of a deficiency of $32,672 in their Federal income tax for 2006 and an accuracy-related penalty of $6,534.40 under section 6662. This case is before us on respondent’s motion for partial summary judgment pursuant to Rule 121 filed on July 19, 2011. Petitioners object to the motion and filed a response. Summary judgment may be granted with respect to all or any part of the legal issues in controversy “if

--- MAJORITY --- Gustafson, Judge: The Internal Revenue Service (ms) determined a deficiency of $1,510 in the 2007 Federal income tax of petitioners Billy Edward Armstrong and Phoebe J. Armstrong and an accuracy-related penalty of $302 pursuant to section 6662. The Armstrongs petitioned this Court, pursuant to section 6213(a), to redetermine the deficiency and the accompanying penalty. The case is now before the Court on the Commissioner’s unopposed motion to submit the case without trial on the

Section 6662 ( ) imposes a penalty equal to 20 percent of the part of an underpayment attributable to (i) negligence or disregard of rules or regulations or (ii) a substantial understatement of income tax. Sec. 6662 (a) and (b) (1) and (2). - 30 - The IRS determined that the Ramigs were liable for penalties under section 6662(a). Because we find t

Robucci's understatements of income tax exceed the thresholds for a finding of "substantial understatement of income tax" under section 6662, respondent has satisfied his burden of production.

tnership allocations to petitioner husband. The Commissioner issued a notice of final partnership administrative adjustment (fpaa) to RJT for 2001 on March 21, 2005, disallowing deductions and losses and determining an accuracy-related penalty under section 6662. Petitioner husband, as the tax matters partner of RJT, petitioned this Court challenging the FPAA in a partnership-level proceeding, RJT Invs. X, LLC v. Commissioner, docket No. 11769-05. The Court entered a decision in that case on Jun

Reliance on professional advice For purposes of section 6664(c), a taxpayer may be able to establish reasonable cause and good faith (and thereby avoid the accuracy-related penalty of section 6662) by showing his reliance on professional advice.

urrent year life insurance protection (excess contribution); (4) whether petitioner must include in his gross income the current year cost of life insurance protection paid by his employer; and (5) whether petitioner is liable for the penalty under section 6662. Background The background facts are drawn from the pleadings, the parties’ motions, facts deemed established, and stipulated exhibits and are not in dispute. At the time of filing of the petition, petitioner was a resident of North Carol

Accuracy-related penalty Section 6662 imposes a 20-percent penalty on an “underpayment” of tax that results either from negligence or disregard of rules and regulations or from a “substantial understatement” of income tax.

Section 6662 requires that we take the greater of the two numbers.

Accordingly, we sustain respondent's determination that petitioners are liable for the section 6662 accuracy-related penalty for 2004 .

the ComrAissioner need, only make a prima facie case that imposition of tde penalty or - addition to tax is appropriate. Higbee v. C mmissioner, supra -at 446. Respondent determined that petitioners re liable for an - accuracy-related penalty under section 6662 ( ) . Section 6662 (a) imposes a 20-percent penalty on the portion cf an underpayment attributable to any,one of various factors, including negligence or disregard of rules or regulations and a sdbstantial understatement of income tax. Se

Accuracy-Related Penalty Under Section 6662 (a ) Section, 6662(a) and (b)(1) and (2)-,provides that"a-.

Accuracy-Related Penalties The-IRS determined a 20-percent penalty-under section 6662 (a) for,each year on the-underpayment of tax resulting .

Section 6664(c)(1) provides that no section 6662 penalty may be imposed if the taxpayer shows that she had reasonable cause for and acted in good faith with respect to the underpayment of tax .

Section 6664(c)(1) provides that no section 6662 penalty may be imposed if the taxpayer shows that she had reasonable cause for and acted in good faith with respect to the underpayment of tax .

Subsection (a) of section 6662 imposes an accuracy-related penalty of 20 percent of any underpayment that is attributable to causes specified in subsection (b) .

We conclude that respondent has satis- fied respondent's burden of production under section 7491(c) with, respect to the accuracy-related penalty under section 6662(a ) that respondent determined in the 2005 notice .

Negligence Penalty As to the Bells, respondent concedes the accuracy-related penalty pursuant to section 6662 in the event the Court upholds the fraud penalty against Mr .

v. Commissioner, T.C. Memo. 1987-176 (citing United States v. Harrington, 388 F.2d 520 (2d Cir. 1968)). Petitioner contends that the opinion letters and the firm list are relevant to its defense against respondent’s determination of penalties under section 6662. No penalty shall be imposed under section 6662(a) with respect to any portion of an underpayment if it is shown that there was reasonable cause and that the taxpayer acted in good faith. See sec. 6664(c). Whether a taxpayer acted with g

Section 6662 Respondent argues that petitioner is liable for the section 6662 penalty for 1999, 2000, and 2001 . Pursuant to section 6662(a), a taxpayer may be liable for a penalty of 20 percent on the portion of an underpayment of tax due to negligence or disregard of rules or regulations or a substantial understatement of income tax. Sec . 6662(b

ose deductions, the overvaluation penalty may not be imposed against petitioners. See also 885 Inv. Co. v. Commissioner, 95 T.C. 156, 163 (1990).43 C. Conclusion Petitioners are not liable for either a 40-percent or 20- percent addition to tax under section 6662. 43In light of our conclusion that the overvaluation penalty may not be imposed, we need not address whether petitioners had "reasonable cause" with the meaning of sec. 6664(c). - 72 - To reflect the foregoing, Decisions will be entered

- 6 - Respondent determined that the amount of petitioners' other income on their 2003 return should be increased by $75,749 because this amount was not excludable from income .2 Respondent also determined a section 6662 penalty for 2003 .

AL REVENUE, Respondent Docket No. 21526-04. Filed March 19, 2008. R determined deficiencies in income tax for Ps’ 2000 and 2001 taxable years, primarily on account of disallowed business expense deductions, and determined that Ps were liable for the sec. 6662, I.R.C., accuracy-related penalty for 2000. Held: Ps failed to substantiate their claimed deductions and are liable for the deficiencies. Held, further, Ps are liable for the sec. 6662, I.R.C., accuracy-related penalty for 2000. Kelvin and

neous disallowance of several incurred expenses, including office, insurance, vehicle, wage, legal and professional, taxes and licenses, commissions and fees, and depreciation and capital losses ; ii . asserting there were additions to tax under IRC § 6662 ; iii . the person who issued the deficiency notice lacked any delegated authority for doing so, and the office issuing the notice lacks jurisdiction ove r Petitioner's geographic location; iv . The tax figures asserted by Respondent are not b

ose deductions, the overvaluation penalty may not be imposed against petitioners. See also 885 Inv. Co. v. Commissioner, 95 T.C. 156, 163 (1990).43 C. Conclusion Petitioners are not liable for either a 40-percent or 20- percent addition to tax under section 6662. 43In light of our conclusion that the overvaluation penalty may not be imposed, we need not address whether petitioners had "reasonable cause" with the meaning of sec. 6664(c). - 72 - To reflect the foregoing, Decisions will be entered

ose deductions, the overvaluation penalty may not be imposed against petitioners. See also 885 Inv. Co. v. Commissioner, 95 T.C. 156, 163 (1990).43 C. Conclusion Petitioners are not liable for either a 40-percent or 20- percent addition to tax under section 6662. 43In light of our conclusion that the overvaluation penalty may not be imposed, we need not address whether petitioners had "reasonable cause" with the meaning of sec. 6664(c). - 72 - To reflect the foregoing, Decisions will be entered

Section 6662 Penalty Respondent argues, in the alterative to the fraud penalty, that petitioner is liable for the accuracy-related penalty under section 6662. Respondent bears the burden of production under section 7491(c) and must come forward with sufficient evidence that it was appropriate to impose the penalty. See Higbee v. Commissioner, 116 T

Under section 6662.(a) and (b)(1), a taxpayer may be liabl e for a 20-percent accuracy-related penalty on the portion of an understatement of tax attributable to negligence or to disregard of rules or regulations . Negligence is strongly - 30 - indicated where a taxpayer "fails to make a reasonable attempt to ascertain the correctness of a deduction, cr

Section 6662 Penalty Subsection (a) of section 6662 imposes an accuracy-related penalty on an underpayment of tax that is equal to 20 percent of any underpayment that is attributable to a list of causes contained in subsection (b) . Among the causes justifying the imposition of the penalty are (1) negligence or disregard of rules or regulations and

- 16 - Accuracy-Related Penalt y Section 6662 imposes a 20-percent accuracy-related penalty on any underpayment of Federal income tax attributable to a taxpayer's negligence or disregard of rules or regulations or substantial understatement of income tax .

Under section 6662.(a) and (b)(1), a taxpayer may be liabl e for a 20-percent accuracy-related penalty on the portion of an understatement of tax attributable to negligence or to disregard of rules or regulations . Negligence is strongly - 30 - indicated where a taxpayer "fails to make a reasonable attempt to ascertain the correctness of a deduction, cr

ose deductions, the overvaluation penalty may not be imposed against petitioners. See also 885 Inv. Co. v. Commissioner, 95 T.C. 156, 163 (1990).43 C. Conclusion Petitioners are not liable for either a 40-percent or 20- percent addition to tax under section 6662. 43In light of our conclusion that the overvaluation penalty may not be imposed, we need not address whether petitioners had "reasonable cause" with the meaning of sec. 6664(c). - 72 - To reflect the foregoing, Decisions will be entered

ose deductions, the overvaluation penalty may not be imposed against petitioners. See also 885 Inv. Co. v. Commissioner, 95 T.C. 156, 163 (1990).43 C. Conclusion Petitioners are not liable for either a 40-percent or 20- percent addition to tax under section 6662. 43In light of our conclusion that the overvaluation penalty may not be imposed, we need not address whether petitioners had "reasonable cause" with the meaning of sec. 6664(c). - 72 - To reflect the foregoing, Decisions will be entered

ose deductions, the overvaluation penalty may not be imposed against petitioners. See also 885 Inv. Co. v. Commissioner, 95 T.C. 156, 163 (1990).43 C. Conclusion Petitioners are not liable for either a 40-percent or 20- percent addition to tax under section 6662. 43In light of our conclusion that the overvaluation penalty may not be imposed, we need not address whether petitioners had "reasonable cause" with the meaning of sec. 6664(c). - 72 - To reflect the foregoing, Decisions will be entered

ose deductions, the overvaluation penalty may not be imposed against petitioners. See also 885 Inv. Co. v. Commissioner, 95 T.C. 156, 163 (1990).43 C. Conclusion Petitioners are not liable for either a 40-percent or 20- percent addition to tax under section 6662. 43In light of our conclusion that the overvaluation penalty may not be imposed, we need not address whether petitioners had "reasonable cause" with the meaning of sec. 6664(c). - 72 - To reflect the foregoing, Decisions will be entered

nto to decrease its partners’ tax liabilities in a manner inconsistent with chapter 1, subchapter K of the Code; (4) neither New Millennium nor its partners entered into the euro options with a profit motive; (5) neither New Millennium nor its partners have established bases in their partnership interests greater than zero; and (6) penalties under section 6662 are applicable.

Accuracy-Related Penalty Under Section 6662(a ) Respondent determined petitioner is liable for an accuracy- related penalty under section 6662(a) for 2002 of $3,419 .

- 25 - Section 6662(a) imposes a penalty of 20 percent of the portion of the underpayment to which section 6662 applies .

Section 6662 Section 6662(a) imposes a 20-percent accuracy-related penalty on the portion of any underpayment attributable to negligence or disregard of rules or regulations . Sec . 6662(b) . The term "negligence" includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code, including any failure by t

Respondent does bear the burden of production with respect to the section 6662 penalty.

3 - Respondent determined the following Federal income tax deficiencies, additions to tax, and penalties for petitioner Erica Y . Wright's (Mrs . Wright) 1999, 2000, and 2001 taxable years : Addition to Tax Penalty Year Deficiency Sec . 6651(a)(1) Sec. 6662 1999 $34,194 .00 $8,528 .25 $6,838 .8 0 2000 4,183 .00 416.00 836 .60 2001 10,495 .00 -- 2,099 .00 After concessions by respondent,3 the issues for decision are : (1) Whether petitioners failed to report distributions in excess of their basi

12, 2003, respondent mailed petitioner a notice of deficiency, determining that for this same period ending June 30, 1998, petitioner had a deficiency in corporate income tax of $3,188 and was liable for an $880 accuracy-related penalty pursuant to section 6662(a.) . The notice of deficiency was predicated in large part on the disallowance of a claimed net operating loss carryforward from petitioner's prior tax year . On September 20, 2003, on petitioner's behalf, Alan executed Form 4089-B, Noti

A substantial understatement of income tax exists for any taxable year for purposes of section 6662 if the amount of the understatement for the taxable year exceeds the greater of 10 percent of the tax required to be shown on the return for the taxable year or, in the case of an individual, $5,000 .

Respondent does bear the burden of production with respect to the section 6662 penalty.

Penalties Respondent has determined accuracy-related penalties pursuant to section 6662, which petitioners have not paid .

Penalty Under Section 6662 and Additions to Tax Under Sections 6651(a)(1) and 6654 1 .

6662 2002 $58,816 $11,763 .20 2003 95, 217 19,043 .40 2004 87, 442 17,488 .40 Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue . After concessions by the parties , the sole issue for decision is whether petitioners are liable for the accuracy- related penalties determined by r

Accuracy-Related Penalty Under Section 6662 Section 6662(a) and (b)(1) imposes an accuracy-related penalty equal to 20 percent of the portion of an underpayment which is attributable to negligence or disregard of rules or regulations .

ience of the taxpayer, and the reliance on the advice of a professional, such as an accountant . Sec . 1.6664-4(b)(1), Income Tax Regs . Respondent has the burden of production under section 7491(c) with respect to the accuracy-related penalty under section 6662 . To meet that burden, respondent must come forward with sufficient evidence indicating that it is appropriate to impose that penalty . Higbee v . Commissioner, 116 T .C . 438, 446 (2001) . Although respondent bears the burden of product

Section 6662 Penalty Pursuant to section 6662(a), a taxpayer may be liable for a penalty of 20 percent on the portion of an underpayment of tax attributable to : (1) Negligence or disregard of rules or regulations or (2) a substantial understatement of income tax . Sec . 6662(b)(1) and (2) . Whether applied because of a substantial understatement o

MEMORANDUM FINDINGS OF FACT AND OPINION VASQUEZ, Judge : Respondent determined a $49,778 deficienc y in petitioner's 2002 Federal income tax and a $9,956 section 6662 4ERVF AUG 1 3 2007 2 - penalty for 2002 .1 After a concession,2 the issues remaining for decision are (1) whether $175,000 petitioner received during 2002 in connection with a settlement of a lawsuit is excludable from gross income pursuant to section 104(a)(2), and (2) whether petitioner is liable for an accuracy-related penalty p

Respondent does bear the burden of production with respect to the section 6662 penalty.

- 2 - MEMORANDUM FINDINGS OF FACT AND OPINION WHERRY, Judge: Respondent determined a Federal income tax deficiency in the amount of $567,864 and a penalty pursuant to section 6662 of $113,572.80 with respect to the 2000 taxable year of Frances Elaine Freedman (decedent).1 After concessions, to be explained in greater detail below, the principal issue for decision is what portion of gain from certain stock sales is taxable to decedent in 2000.

A substantial understatement of income tax exists for any taxable year for purposes of section 6662 if the amount of the understatement for the taxable year exceeds the greater of 10 percent of the tax required to be shown on the return for the taxable year or $5,000 .

r is found not to be liable for the civil fraud penalty pursuant to section 6663 on any portion of the underpayment for any of the years in issue, petitioner is liable for the accuracy-related penalty on such portion of the underpayment pursuant to section 6662 . 1 Unless otherwise indicated, all section references are to the Internal Revenue Code, and all Rule references are to the Tax Court Rules of Practice and Procedure . 2 The parties stipulated that petitioner received small amounts of int

s relating to their racing activities ; and (5) whether petitioners are liable for the fraud penalty pursuant to section 6663 for the years in issue or, in the alternative, whether petitioners are liable for the accuracy- related penalty pursuant to section 6662 . - 3 - FINDINGS OF FACT Some of the facts have been stipulated, and the stipulated facts are incorporated into our findings by this reference . Petitioners are married and resided in Oklahoma at the time that they filed their petition .

MEMORANDUM FINDINGS OF FACT AND OPINION WHERRY, Judge : Respondent determined a Federal income tax deficiency for petitioners ' 2000 taxable year in the amount of $167,221 and a penalty pursuant to section 6662 (a) in the amount of $33,444 .1 After concessions , the principal issues for decision are : .

othy Kosinski’s solely owned S corporation; (2) whether petitioners are liable for the fraud penalty pursuant to section 6663 for the year in issue, or, in the alternative, whether petitioners are liable for the accuracy- related penalty pursuant to section 6662; (3) whether petitioner Barbara Kosinski is entitled to relief pursuant to section 6015 for 1997; and (4) whether the statute of limitations bars assessment and collection of petitioners’ income tax liabilities for 1997.

whether petitioners a re liable for penalties pursuant to section 6662 ( a) and (b)(1) .

Respondent does bear the burden of production with respect to the section 6662 penalty.

Respondent does bear the burden of production with respect to the section 6662 penalty.

eneral description of Son-of-BOSS cases. Petitioner petitioned the Court on January 9, 2006, to redetermine respondent’s determination of a $444,063 deficiency in petitioner’s 2000 Federal income tax and a $177,625.20 accuracy-related penalty under section 6662. The determinations were contained in an affected items notice of deficiency mailed to petitioner on October 11, 2005, relating to respondent’s adjustments in a notice of final partnership administrative adjustment (FPAA) issued for the 2

A notice of deficiency followed, in which the Commissioner asserted an accuracy-related penalty under section 6662 on the entire deficiency.3 The parties originally submitted the case for decision on stipulated facts under Rule 122, but it was then restored to the Court’s general docket for trial.

ground that the disallowed expenses were unrelated to P’s business activities. For all of the audit years, however, R allowed some of P’s expenses as deductions on Schedule A, Itemized Deductions. For 1997, R also determined that P is subject to the sec. 6662, I.R.C., accuracy-related penalty. 1. Held: R’s denial of business expense deductions under sec. 162(a), I.R.C., sustained. - 2 - 2. Held, further, modifications to the deficiency determinations for 1997-99 required in order to correct comp

- 2 - $8,022 section 6662 penalty.2 After concessions by both parties, the issues that remain for decision are: (1) Whether petitioners are deemed to have admitted the statements in respondent’s requests for admission by not timely responding to those requests, (2) whether petitioners are entitled to deduct expenses claimed on Schedule C, Profit or Loss From Bu

-2- report income and are liable for the section 66632 fraud or the section 6662 accuracy-related penalty.

-2- report income and are liable for the section 66632 fraud or the section 6662 accuracy-related penalty.

onomic substance. Because we sustain respondent’s determination, we need not and do not decide the alternative issues raised by respondent. We turn instead to respondent’s contention that petitioners are liable for the accuracy-related penalty under section 6662. II. Petitioners’ Liability for Section 6662 Penalty Respondent contends that petitioners are liable for the accuracy-related penalty under section 6662 on alternate grounds: (1) The underpayment of tax was attributable to negligence or

r the remaining deficiencies, except for an adjustment for a reduced share of income from one LLC in 1999, determined by R for 1999 and 2000 including self-employment taxes pursuant to sec. 1401, I.R.C. Held, further, P is liable for a penalty under sec. 6662, I.R.C., for 1999 and 2000. - 2 - Sue Taylor, pro se. Cameron M. McKesson, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION ·WHERRY, Judge: Respondent determined Federal income tax deficiencies in the amounts of $49,525 and $39,717 .

by HJ Builders with regard to a Lexus SUV used by Mrs . Wright are business expenses deductible by HJ Builders or are constructive dividends to the Wrights ; and (4) whether HJ Builders or the Wrights are liable for accuracy-related penalties under section 6662 . Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and - 3 - all Rule references are to the Tax Court Rules of Practice and Procedure . All amounts have been rounded to

and thereafter entered bankruptcy proceedings. Held: Ps’ income and losses for 1994 and 1995 related to ownership of A, T, and E are to be adjusted consistent with this opinion. Held, further, Ps are liable for accuracy-related penalties pursuant to sec. 6662, I.R.C., for 1994 and 1995 to the extent that underpayments remain following recomputation in accordance with the Court’s resolution of substantive issues. - 2 - Thomas and Janice Gleason, pro sese. John W. Stevens, for respondent. MEMORAND

MEMORANDUM OPINION WELLS, Judge: Respondent determined a deficiency in petitioners’ 2000 Federal income tax of $91,763, a section 6651(a)(1) addition to tax for failure to file of $9,176.30, and a section 6662 accuracy-related penalty of $18,352.60.

self-employment income pursuant to section 1401 ; (4) whether petitioners are liable for an addition to tax for failure to file timely pursuant to section 6651(a)(1) ; and (5) whether petitioners are liable for accuracy-related penalties pursuant to section 6662 . FINDINGS OF FACT Some of the facts in this case have been stipulated . The stipulated facts and accompanying exhibits are incorporated herein by this reference . Petitioners are husband and wife . We hereinafter refer to Richard D . Ir

investor in a tax shelter promoted by Hoyt. It further informed petitioner that deductions relating to the tax shelter would not be allowed and that claiming such deductions - 13 - could result in the imposition of an accuracy-related penalty under section 6662. After receiving the prefiling notice, petitioner visited Barnes at Elk Grove Ranch. Barnes told petitioner that the letter was a part of an “ongoing bitter battle” and that Hoyt was still an enrolled agent. Barnes took petitioner on a to

MEMORANDUM FINDINGS OF FACT AND OPINION WELLS, Judge : Respondent determined a deficiency in petitioner's 2000 Federal Income tax of $159,008 and an accuracy- related penalty of $31,802 pursuant to section 6662 (a) .1 The 'Unless otherwise noted, all section references are to the Internal Revenue Code, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure .

we find that petitioner's horse activity was not engaged in for profit within the meaning of section 183. Therefore, respondent's determination that petitioner may not deduct losses from that activity is sustained. B. Accuracy-Related Penalty- Under Section 6662 . Respondent determined that petitioner is liable for accuracy-related penalties under section 6662(a) for 1999 and 2000.¹³ Section 6662(a) imposes a penalty in the amount of 20 percent on the portion of the underpayment to which the sec

2000-32 The reco d in the instant case clearly indicates that petitioners h d ample opportunity to dispute the liability reported on t eir amended tax return for 1989 and the $13,85 8 section 6662 penalty for that year .

MEMORANDUM FINDINGS OF FACT AND OPINION LARO, Judge : Petitioners petitioned the Court to redetermine respondent's determination of deficiencies of $18,243 and $19,917 in their 2001 and 2002 Federal income taxes, respectively, and section 6662 accuracy-related penalties of $3,648 .60 and $3,983 .40, respectively .

ACT AND OPINION WHERRY, Judge: Respondent determined the following deficiencies and penalties with respect to petitioners’ Federal income taxes for the 1996 and 1997 taxable years:1 Homer L. Richardson - Docket No. 16794-03 Penalties Year Deficiency Sec. 6662 Sec. 6663 1996 $164,442 $67.80 $123,077.25 1997 123,848 92,886.00 1 Unless otherwise indicated, section references are to the Internal Revenue Code in effect for the years in issue, and Rule references are to the Tax Court Rules of Practice

oes not establish that RVED M 2 -2- P-H received any part of the $135,000 sum on account of personal physical injury or physical sickness, as required by sec. 104(a)(2), I.R.C. Held, further, Ps are liable for accuracy-related penalties pursuant to sec. 6662, I.R.C. Held, further, Jurisdiction of this Court is not available to consider Ps claim for suspension of interest under sec. 6404(g), I.R.C. Thomas F. DeCaro, Jr., for petitioners. Innessa Glazman Molot, for respondent. MEMORANDUM FINDINGS

-2- report income and are liable for the section 66632 fraud or the section 6662 accuracy-related penalty.

d Izen, Jr., for petitioners. Anne W. Durning, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION COLVIN, Judge: Respondent determined deficiencies and penalties with respect to petitioners’ Federal income tax as follows: - 2 - Year Deficiency Sec. 6662 Penalty 1995 $119,377 $23,875 1996 68,663 13,733 1997 4,849 970 1998 14,382 12,876 1 Respondent concedes that petitioners are not liable for the accuracy- related penalty for 1998. After concessions, we must decide: 1. Whether the notice of

Section 6662 The brothers also contest the Commissioner’s determination to impose an accuracy-related penalty under section 6662. The Commissioner gives two reasons to support his determination. The first is negligence. The regulation defines negligence as not making a reasonable attempt to comply with the provisions of the internal revenue laws or

onomic substance. Because we sustain respondent’s determination, we need not and do not decide the alternative issues raised by respondent. We turn instead to respondent’s contention that petitioners are liable for the accuracy-related penalty under section 6662. II. Petitioners’ Liability for Section 6662 Penalty Respondent contends that petitioners are liable for the accuracy-related penalty under section 6662 on alternate grounds: (1) The underpayment of tax was attributable to negligence or

ACT AND OPINION WHERRY, Judge: Respondent determined the following deficiencies and penalties with respect to petitioners’ Federal income taxes for the 1996 and 1997 taxable years:1 Homer L. Richardson - Docket No. 16794-03 Penalties Year Deficiency Sec. 6662 Sec. 6663 1996 $164,442 $67.80 $123,077.25 1997 123,848 92,886.00 1 Unless otherwise indicated, section references are to the Internal Revenue Code in effect for the years in issue, and Rule references are to the Tax Court Rules of Practice

Respondent had not imposed any accuracy-related penalty under section 6662 with respect to either the 1999 or 2000 taxable year.

MEMORANDUM OPINION WELLS, Judge: Respondent determined a deficiency.in petitioner's 2000 Federal income tax of $277,951 and a section 6662 accuracy-related penalty of $55,590.20.

Respondent also determined a deficiency of $34,270 and an accuracy-related penalty under section 6662 of $6,854 in petitioner Royal American Foods, Inc.’s (RAF) Federal income tax for 1999.

Petitioner is Not Liable for Section 6662 Accuracy-Related Penalties Respondent assessed section 6662(a) penalties of $64,703.40 and $41,502.20 against petitioner for 1999 and 2000, 6 This finding does not include the following amounts conceded by petitioner: (1) Capital gain of $137,880 received in 1999, and (2) additional income of $4,415.57 and $10,000 received in 1999 and

ement...................................... 114 3. Petitioner’s Entitlement to a Business Deduction...................................... 118 IV. Petitioner’s Advances to Koehler....................... 119 V. Is Petitioner Liable for Penalties Under Section 6662?. 122 Appendixes Appendix A--Flow Chart Reflecting the Basic Elements of the Transactions in the Two Lease Strip Deals. 129 Appendix B--Summary of Appendix A......................... 132 Appendix C--Existing End User Equipment Rental Mon

sued for 1998 is relevant for purposes of deciding whether Rev. Proc. 2003-61, 2003-2 C.B. 296, or Rev. Proc. 2000-15, 2000-1 C.B. 447, applies. - 6 - judgment. Respondent was not moving for summary judgment as to the accuracy-related penalty under section 6662. In addition, respondent notified the Court that Tomi had filed a claim for relief under section 6015 and that the summary judgment motion did not include Tomi’s request for relief under section 6015. The Court granted respondent’s motion

The resulting notice of.deficiency included a penalty under section 6662¹ for negligence.

Kong (petitioners) are liable for fraud penalties pursuant to section 6663 for the taxable years 1994 and 1995; or, in the alternative, whether petitioners are liable for accuracy-related penalties pursuant to section 6662 for the taxable year of 1995; and (5) whether the period of limitations bars the assessment and collection of the deficiencies in taxes and penalties that 2 On brief, respondent concedes that the unreported gross receipts of Sam Kong Fashions, Inc., which were determined in th

Respondent also determined a deficiency of $34,270 and an accuracy-related penalty under section 6662 of $6,854 in petitioner Royal American Foods, Inc.’s (RAF) Federal income tax for 1999.

Kong (petitioners) are liable for fraud penalties pursuant to section 6663 for the taxable years 1994 and 1995; or, in the alternative, whether petitioners are liable for accuracy-related penalties pursuant to section 6662 for the taxable year of 1995; and (5) whether the period of limitations bars the assessment and collection of the deficiencies in taxes and penalties that 2 On brief, respondent concedes that the unreported gross receipts of Sam Kong Fashions, Inc., which were determined in th

Whether petitioners are liable for qccuracy-related penalties under section 6662 (a) for 1999, 200 , and 2001.

For purposes of section 6662, the term “underpayment” is defined by section 6664(a) to mean the amount by which the tax imposed exceeds the excess of (1) the sum of (A) the amount shown as the tax by the taxpayer on his return, plus (B) amounts not so shown previously assessed (or collected without assessment), over (2) the amount of rebates made.

Accuracy-Related Penalties Under Section 6662 for Negligence or Disregard of the Rules or Regulations Section 6662 provides for a 20-percent penalty on any understatement of tax attributable to negligence or disregard of the rules or regulations, or any substantial understatement of income tax.

Respondent also determined penalties under section 6662¹ of $499.40, $744.80, lUnless otherwise indicated, all section references are to the Internal Revenue Code as amended, and all Rule references are (continued...) SERVED ROV 1 8 200 - 2 - $575, and $669, for 1996, 1997, 1998, and 1999, respectively.

Whether Petitioners Are Liable for the Accuracy-Related Penalty Respondent met the burden of production under section 7491(c) with respect to the accuracy-related penalty under section 6662 because petitioners conceded that they are not entitled to deduct certain charitable contributions, employee business expenses, miscellaneous expenses, and Schedule C losses, and they figured their tax liability for 1999 by computing depreciation using clearly improper methods.4 3 See also sec.

(Dynamex); and (2) whether petitioner is liable for the section 6662 penalty for 2000.

d a $4,865.20 1 Unless otherwise stated, all section references are to the Internal Revenue Code in effect for the taxable year in issue. All Rule references are to the Tax Court Rules of Practice and Procedure. - 2 - accuracy-related penalty under section 6662. After concessions, the issues remaining for our consideration are: (1) Whether Kenneth W. Graves’s (petitioner) bad debt, which arose in the course of his business as an employee, is deductible in computing adjusted gross income or an it

To abate a penalty for negligence and substantial understatement under §6662, Petitioners, under §6664(c) and Reg.

Accuracy-Related Penalty Under Section 6662 Section 6662, applicable to petitioner’s 1989 and 1990 years, authorizes the imposition of a 20-percent penalty for specified types of misconduct, including negligence or disregard of rules or regulations.

rposes. See Zmuda v. Commissioner, 79 T.C. 714, 719 (1982), affd. 731 F.2d 1417 (9th Cir. 1984). We have held that, if a transaction has not altered 26Although respondent has the initial burden of production with respect to the penalty imposed under sec. 6662, the burden of proof remains on petitioners. Sec. 7491(c). - 37 - any cognizable economic relationships, we must look beyond the form of the transaction and apply the tax law according to the transaction’s substance. See Markosian v. Commis

titioner. Dustin M. Starbuck, for respondent. MEMORANDUM OPINION CHABOT, Judge: Respondent determined deficiencies in individual income tax and penalties under section 66621 (accuracy-related) against petitioner as follows: Penalties Year Deficiency Sec. 6662 1995 $118,980 $23,796.00 1996 746,843 149,368.60 1 Unless indicated otherwise, all section references are to sections of the Internal Revenue Code of 1986 as in effect for the years in issue. - 3 - After concessions by both sides,2 the issu

Section 6662 Pursuant to section 6662(a), a taxpayer may be liable for a penalty of 20 percent on the portion of an underpayment of tax (1) attributable to a substantial understatement of tax or (2) due to negligence or disregard of rules or regulations. Sec. 6662(b). Whether applied because of a substantial understatement of tax or negligence or d

Under section 6662, an accuracy-related penalty is to be added to the portion of an underpayment of tax attributable to negligence, to a disregard of rules or regulations, or to a substantial understatement of income tax. Generally, for purposes of the accuracy-related penalty, negligence includes a failure to make a reasonable attempt to comply with the

Petitioner conceded that he owed the deficiency and the section 6662 penalty.

Accuracy-Related Penalty Under Section 6662 Section 6662, applicable to petitioner’s 1989 and 1990 years, authorizes the imposition of a 20-percent penalty for specified types of misconduct, including negligence or disregard of rules or regulations.

rposes. See Zmuda v. Commissioner, 79 T.C. 714, 719 (1982), affd. 731 F.2d 1417 (9th Cir. 1984). We have held that, if a transaction has not altered 26Although respondent has the initial burden of production with respect to the penalty imposed under sec. 6662, the burden of proof remains on petitioners. Sec. 7491(c). - 37 - any cognizable economic relationships, we must look beyond the form of the transaction and apply the tax law according to the transaction’s substance. See Markosian v. Commis

However, section 6664(b) provides that an accuracy-related penalty under section 6662 is applicable only where a return has been filed.

nd mailed to the Madeira Drive address, respondent adjusted petitioner’s income to include $10,744 of nonemployee compensation and determined a $2,782 deficiency in petitioner’s 1992 Federal income tax and a $556 accuracy-related penalty pursuant to section 6662. In the notice of deficiency, respondent allowed petitioner no business expense deduction. The notice of deficiency contained instructions for filing a petition with the Tax Court, and indicated that any Tax Court petition should be file

(motion for reconsideration) regarding our opinion in Rinehart v. Commissioner, T.C. Memo. 2002-71 (Rinehart II). Respondent determined deficiencies in and penalties on petitioners’ Federal income taxes as follows: Penalty Docket No. Year Deficiency Sec. 6662 20185-98 1994 $46,894 $9,379 15968-99 1995 29,264 5,853 15969-99 1995 28,765 5,753 15969-99 1996 53,869 10,774 7007-00 1996 27,032 5,406 In Rinehart v. Commissioner, T.C. Memo. 2002-9 (Rinehart I), we addressed the issue of whether Dale A.

Gannon, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION GERBER, Judge: Respondent determined deficiencies in petitioners’ Federal income tax and penalties for the taxable years 1993, 1994, and 1995, as follows: - 2 - Penalty Year Deficiency Sec. 6662 1993 $18,873 $3,775 1994 47,756 9,551 1995 51,584 10,317 The issues presented for our consideration are: (1) Whether a $116,000 settlement payment is excludable from gross income under section 104(a)(2);1 (2) whether $48,4202 in payments was

6662 1994 $48,968 $611 $9,794 1995 14,397 254 3,133 On September 21, 1999, the Court filed respondent’s Motion To Dismiss In Part For Lack Of Jurisdiction And To Strike As To The Amounts Of Employment Taxes And Additions To Tax Proposed For Assessment By The Respondent (partial motion to dismiss). On October 12, 1999, the Court filed petitione

The deficiencies totaled $197,823; the section 6651(a)(1),1 6653(a), 6654(a), and 6661 additions to tax totaled $80,303; and the section 6662 penalties totaled $10,594.

y other court, and this opinion should not be cited as authority. - 2 - Respondent determined deficiencies in petitioners’ Federal income taxes, additions to tax, and penalties as follows: Additions to Tax Penalties Year Deficiency Sec. 6651(a)(1) Sec. 6662 1992 $25,952 $5,929 $5,190 1993 5,914 870 1,183 1994 12,751 2,597 2,550 The issues for decision for each year in issue are: (1) Whether petitioners underreported income; (2) whether petitioners are entitled to depreciation deductions greater

Section 6662 Accuracy-Related Penalty Section 6662 provides for an accuracy-related penalty equal to 20 percent of the underpayment if the underpayment was due to a taxpayer’s negligence or disregard of rules or regulations. See sec. 6662(a) and (b)(1). A taxpayer is negligent when he or she fails “‘to do what a reasonable and ordinarily prudent pe

Weiler, (7) an increase of $2 in alternative minimum tax, and (8) an $885.60 section 6662 penalty.

- 4 - (3) Whether petitioners are liable for accuracy-related penalties pursuant to section 6662 for the taxable years 1994, 1995, and 1996.

Weiler, (7) an increase of $2 in alternative minimum tax, and (8) an $885.60 section 6662 penalty.

Section 6662 Accuracy-Related Penalty In determining that petitioners are liable for the section 6662 accuracy-related penalty, respondent determined that all of the underpayment of tax for 1994 and 1995 is due to negligence or disregard of rules or regulations, and that petitioners have not established that such underpayment was due to reasonable

ner was told that structuring the settlement to include a claim for personal injury would relieve him of his tax liability. Based on our review of the record, we conclude that petitioners are not liable for the accuracy-related penalty imposed under section 6662. - 20 - To reflect the foregoing, Decision will be entered for respondent with respect to the deficiency and for petitioner with respect to the penalty.

(motion for reconsideration) regarding our opinion in Rinehart v. Commissioner, T.C. Memo. 2002-71 (Rinehart II). Respondent determined deficiencies in and penalties on petitioners’ Federal income taxes as follows: Penalty Docket No. Year Deficiency Sec. 6662 20185-98 1994 $46,894 $9,379 15968-99 1995 29,264 5,853 15969-99 1995 28,765 5,753 15969-99 1996 53,869 10,774 7007-00 1996 27,032 5,406 In Rinehart v. Commissioner, T.C. Memo. 2002-9 (Rinehart I), we addressed the issue of whether Dale A.

ct to petitioners’ Federal income taxes:1 1All section references are to the Internal Revenue Code in effect for the taxable years at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. - 2 - Penalty Year Deficiency Sec. 6662 1998 $30,752 $6,150 1999 32,136 6,427 After concessions,2 the issues for decision are as follows: (1) Whether petitioners are entitled to deduct net operating loss carryforwards computed with respect to 1975 on their Federal income tax retur

in the year in which the goods and services were provided. Held: Payments received by P under its preneed funeral contracts are includable in gross income only upon the provision of the subject goods and services. Held, further, P is liable for the sec. 6662, I.R.C., accuracy-related penalty with respect to items conceded by P, apart from the preneed accounting issue. - 2 - Edward DeFranceschi, David Klemm, and Jason Bell, for petitioner. Louise R. Forbes, for respondent. MEMORANDUM FINDINGS OF

tax for 1996 and 1997.34 33Mr. Sowards purported to have assigned beneficial interests in WPA to his wife and family, not to Mr. Strong. 34Since we sustain respondent’s fraud penalties, respondent’s alternative accuracy-related penalty pursuant to sec. 6662 is moot. On brief, Mr. Sowards conceded additions to tax under sec. 6654. - 36 - E. Negligence Penalties In the notices of deficiency, respondent determined accuracy-related penalties pursuant to section 6662 in the amounts of $19,738.00,35

Section 6662 Accuracy-Related Penalty Respondent determined accuracy-related penalties under section 6662(a). Under section 6662(a), a taxpayer may be liable for a penalty of 20 percent on the portion of an underpayment of tax due to, inter alia, negligence or disregard of the rules or regulations. Sec. 6662(b)(1). The term “negligence” includes an

Neal, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION COLVIN, Judge: Respondent determined deficiencies in petitioner’s Federal income tax and additions to tax and penalties as follows: - 2 - Additions to Tax Year Deficiency Sec. 6651(a)(1) Sec. 6662 1992 $9,429 $464 $1,886 1993 8,878 1,332 1,776 1994 3,861 –- 772 The issues for decision are: 1. Whether petitioner had unreported income of $35,125 in 1992, $30,247 in 1993, and $16,305 in 1994. We hold that he had unreported income of $29,

tax for 1996 and 1997.34 33Mr. Sowards purported to have assigned beneficial interests in WPA to his wife and family, not to Mr. Strong. 34Since we sustain respondent’s fraud penalties, respondent’s alternative accuracy-related penalty pursuant to sec. 6662 is moot. On brief, Mr. Sowards conceded additions to tax under sec. 6654. - 36 - E. Negligence Penalties In the notices of deficiency, respondent determined accuracy-related penalties pursuant to section 6662 in the amounts of $19,738.00,35

Section 6662 Accuracy-Related Penalty Section 6662 provides for an accuracy-related penalty equal to 20 percent of the underpayment if the underpayment was due to a taxpayer’s negligence or disregard of rules or regulations. See sec. 6662(a) and (b)(1). A taxpayer is negligent when he or she fails “‘to do what a reasonable and ordinarily prudent pe

(motion for reconsideration) regarding our opinion in Rinehart v. Commissioner, T.C. Memo. 2002-71 (Rinehart II). Respondent determined deficiencies in and penalties on petitioners’ Federal income taxes as follows: Penalty Docket No. Year Deficiency Sec. 6662 20185-98 1994 $46,894 $9,379 15968-99 1995 29,264 5,853 15969-99 1995 28,765 5,753 15969-99 1996 53,869 10,774 7007-00 1996 27,032 5,406 In Rinehart v. Commissioner, T.C. Memo. 2002-9 (Rinehart I), we addressed the issue of whether Dale A.

rmined the following deficiencies, additions to tax, and penalties in petitioner’s Federal income taxes: 1 These cases were consolidated for purposes of trial, briefing, and opinion. - 2 - Additions to Tax Penalties Year Deficiency Sec. 6651(a)(1) Sec. 6662 1996 $2,617 $750 $523 1997 6,292 1,605 1,258 2000 5,723 --- 837 The issues for decision are: (1) Whether petitioner is liable for the deficiencies respondent determined in the notices of deficiency for 1996, 1997, and 2000 (years in issue); (

Because we have decided that petitioners are not liable for a section 6662 penalty, there is no need to address the question of the burden on that issue.

In both notices, respondent determined that the section 6662 accuracy-related penalty was applicable with respect to the taxable years ended in 1994.

Negligence Penalty Section 6662 provides for an accuracy-related penalty equal to 20 percent of the underpayment if the underpayment was due to a taxpayer’s negligence or disregard of rules or regulations.

MEMORANDUM FINDINGS OF FACT AND OPINION COLVIN, Judge: Respondent determined a deficiency in petitioners’ Federal income tax of $19,675 and an accuracy- related penalty under section 6662 of $3,935 for 1995.

(motion for reconsideration) regarding our opinion in Rinehart v. Commissioner, T.C. Memo. 2002-71 (Rinehart II). Respondent determined deficiencies in and penalties on petitioners’ Federal income taxes as follows: Penalty Docket No. Year Deficiency Sec. 6662 20185-98 1994 $46,894 $9,379 15968-99 1995 29,264 5,853 15969-99 1995 28,765 5,753 15969-99 1996 53,869 10,774 7007-00 1996 27,032 5,406 In Rinehart v. Commissioner, T.C. Memo. 2002-9 (Rinehart I), we addressed the issue of whether Dale A.

The deficiencies totaled $197,823; the section 6651(a)(1),1 6653(a), 6654(a), and 6661 additions to tax totaled $80,303; and the section 6662 penalties totaled $10,594.

e certain documents requested by R. P refused to be interviewed by R. R denied P’s claim for refund and determined that none of the $4 million paid to settle the defamation claim was excludable from income, and P was liable for a penalty pursuant to sec. 6662, I.R.C., for all years. Held: P did not cooperate with R. Accordingly, P bears the burden of proof. Sec. 7491(a), I.R.C.; Rule 142(a). Held, further, pursuant to sec. 104(a)(2), I.R.C., before its amendment by the Small Business Job Protect

Penalties Section 6662 imposes a penalty of 20 percent of the portion of the underpayment which is attributable to negligence or disregard of rules or regulations.

Gannon, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION GERBER, Judge: Respondent determined deficiencies in petitioners’ Federal income tax and penalties for the taxable years 1993, 1994, and 1995, as follows: - 2 - Penalty Year Deficiency Sec. 6662 1993 $18,873 $3,775 1994 47,756 9,551 1995 51,584 10,317 The issues presented for our consideration are: (1) Whether a $116,000 settlement payment is excludable from gross income under section 104(a)(2);1 (2) whether $48,4202 in payments was

In the notice of deficiency, respondent determined an $84 accuracy-related negligence penalty under section 6662 attributable to those two items for 1991.

MEMORANDUM FINDINGS OF FACT AND OPINION COLVIN, Judge: Respondent determined a deficiency in petitioner's 1996 Federal income tax of $503,105 and an accuracy- related penalty under section 6662 of $100,621.

ral income taxes as follows: 1 Cases of the following petitioners are consolidated herewith: Jeana L. Yeager, docket No. 15968-99; Dale A. Rinehart, docket No. 15969-99; Jeana L. Yeager, docket No. 7007- 00. - 2 - Penalty Docket No. Year Deficiency Sec. 6662 20185-98 1994 $46,894 $9,379 15968-99 1995 29,264 5,853 15969-99 1995 28,765 5,753 15969-99 1996 53,869 10,774 7007-00 1996 27,032 5,406 The issue addressed in this opinion is whether petitioner Dale A. Rinehart’s (Mr. Rinehart) horse breedi

Section 6662 Penalty Section 6662 provides that if any portion of any underpayment is due to negligence, then a taxpayer will be liable for a penalty equal to 20 percent of the underpayment of tax required to be shown on the return that is attributable to the taxpayer's negligence or disregard of rules or regulations. See sec. 6662(a) and (b)(1). N

f income tax, section 6662(b)(2), or a substantial valuation misstatement, section 6662(b)(3).25 An underpayment is not attributable to negligence or intentional disregard, substantial understatement of income tax, or a valuation misstatement under section 6662 to the extent that the taxpayer shows that he had reasonable cause for the underpayment and that he acted in good faith with respect to such underpayment.

Accuracy-Related Penalty of Section 6662(a) Section 6662 provides for an accuracy-related penalty equal to 20 percent of the underpayment if such underpayment was due to taxpayer’s negligence or substantial understatement of income tax.

at each claimed deduction was an ordinary and necessary business expense, or because petitioners failed to substantiate payment of each claimed deduction. Respondent also determined that petitioners were liable for an accuracy-related' penalty under section 6662. - 6 - On November 9, 2000, petitioners filed a motion to dismiss on the ground that the period of limitations for assessment under section 6501 and section 301.6501(a)-1, Proced. & Admin. Regs., had expired. At the call of the trial cal