Corporation that failed to provide accountant with sufficient information to prepare return was liable for accuracy-related penalties.

• Author: Fiore, Nicholas J.

R was a Nebraska corporation that, through a subsidiary, operated a Ford dealership in Nebraska. In 1993 and 1994, R employed individuals and used computer systems to keep records. R provided some, but not all, of its records (i.e., Ford Motor Company Dealer Financial Statements) to an accountant hired to prepare consolidated corporate income tax returns for the years in issue. The IRS determined that R understated its income and is liable for accuracy-related penalties for 1993 and 1994.

Sec. 6662(a) imposes a penalty on an underpayment of tax reportable on a return if such underpayment is attributable to negligence. Sec. 6664(c)(1) provides that no penalty shall be imposed if it is shown that there was reasonable cause for the underpayment and that the taxpayer acted in good faith. The determination of whether a taxpayer acted with reasonable cause and in good faith depends on the facts and circumstances; see Regs. Sec. 1.6664-4...