26 C.F.R. § 1.6664-1

Accuracy-related and fraud penalties; definitions, effective date and special rules

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(a) In general. Section 6664(a) defines the term “underpayment” for purposes of the accuracy-related penalty under section 6662 and the fraud penalty under section 6663. The definition of “underpayment” of income taxes imposed under subtitle A is set forth in § 1.6664-2. Ordering rules for computing the total amount of accuracy-related and fraud penalties imposed with respect to a return are set forth in § 1.6664-3. Section 6664(c) provides a reasonable cause and good faith exception to the accuracy-related penalty. Rules relating to the reasonable cause and good faith exception are set forth in § 1.6664-4.

(b) Effective date—(1) In general. Sections 1.6664-1 through 1.6664-3 apply to returns the due date of which (determined without regard to extensions of time for filing) is after December 31, 1989.

(2) Reasonable cause and good faith exception to section 6662 penalties. (i) For returns due after September 1, 1995. Section 1.6664-4 applies to returns the due date of which (determined without regard to extensions of time for filing) is after September 1, 1995. Except as provided in the last sentence of this paragraph (b)(2), § 1.6664-4 (as contained in 26 CFR part 1 revised April 1, 1995) applies to returns the due date of which (determined without regard to extensions of time for filing) is on or before September 1, 1995 and after December 31, 1989. For transactions occurring after December 8, 1994, § 1.6664-4 (as contained in 26 CFR part 1 revised April 1, 1995) is applied taking into account the changes made to section 6662(d)(2)(C) (relating to the substantial understatement penalty for tax shelter items of corporations) by section 744 of title VII of the Uruguay Round Agreements Act, Pub. L. 103-465 (108 Stat. 4809).

(ii) For returns filed after December 31, 2002. Sections 1.6664-4(c) (relating to relying on opinion or advice) and (d) (relating to underpayments attributable to reportable transactions) apply to returns filed after December 31, 2002, with respect to transactions entered into on or after January 1, 2003. Except as provided in paragraph (b)(2)(i) of this section, § 1.6664-4 (as contained in 26 CFR part 1 revised April 1, 2003) applies to returns filed with respect to transactions entered into before January 1, 2003.

(3) Qualified amended returns. Sections 1.6664-2(c)(1), (c)(2), (c)(3)(i)(A), (c)(3)(i)(B), (c)(3)(i)(C), (c)(3)(i)(D)(2), (c)(3)(i)(E), and (c)(4) are applicable for amended returns and requests for administrative adjustment filed on or after March 2, 2005. Sections 1.6664-2(c)(3)(i)(D)(1) and (c)(3)(ii)(B) and (C) are applicable for amended returns and requests for administrative adjustment filed on or after April 30, 2004. The applicability date for § 1.6664-2(c)(3)(ii)(A) varies depending upon which event occurs under § 1.6664-2(c)(3)(i). For purposes of § 1.6664-2(c)(3)(ii)(A), the date described in § 1.6664-2(c)(3)(i)(D)(1) is applicable for amended returns and requests for administrative adjustment filed on or after April 30, 2004. For purposes of § 1.6664-2(c)(3)(ii)(A), the dates described in § 1.6664-2(c)(3)(i)(A), (B), (C), (D)(2), and (E) are applicable for amended returns and requests for administrative adjustment filed on or after March 2, 2005. Section 1.6664-2(c)(1) through (c)(3), as contained in 26 CFR part 1 revised as of April 1, 2004 and as modified by Notice 2004-38, 2004-1 C.B. 949, applies with respect to returns and requests for administrative adjustment filed on or after April 30, 2004 and before March 2, 2005. Section 1.6664-2(c)(1) through (3), as contained in 26 CFR part 1 revised as of April 30, 2004, applies with respect to returns and requests for administrative adjustment filed before April 30, 2004.

[T.D. 8381, 56 FR 67506, Dec. 31, 1991, as amended by T.D. 8617, 60 FR 45666, Sept. 1, 1995; T.D. 9109, 68 FR 75128, Dec. 30, 2003; T.D. 9309, 72 FR 903, Jan. 9, 2007]

Notes of Decisions

Cited in 7 cases, 1999–2017 · leading case: Southgate Master Fund, L.L.C. Ex Rel. Montgomery Capital Advisors, LLC v. United States, 659 F.3d 466 (5th Cir. 2011).

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Southgate Master Fund, L.L.C. Ex Rel. Montgomery Capital Advisors, LLC v. United States, 659 F.3d 466 (5th Cir. 2011). “See 26 C.F.R. § 1.6664-1 (b)(1). Where, as here, the reasonable-cause defense is asserted in a partnership-level proceeding, we look to the conduct of the partnership’s managing partners in evaluating the reasonableness of the partnership's reporting position.”

Stromme v. Comm'r, 138 T.C. 213 (Tax Ct. 2012). · cites it 2× “On the basis of these facts, particularly the Strommes' honest attempts to calculate their tax liabilities, we therefore find that the Strommes had reasonable cause to take the reporting position that they did.”

Barnes v. Comm'r, 2016 T.C. Memo. 79 (Tax Ct. 2016). · cites it 2× “Petitioners' position with respect to their umreimbursed employee expenses for Mr. Barnes' Ralph Lauren clothing is not consistent with prior Court *88 decisions, and they failed to adequately substantiate their charitable contributions.”

Gilbert v. Comm'r, 2016 T.C. Summary Opinion 17 (Tax Ct. 2016). · cites it 4× “Generally, the most important factor is the extent of the taxpayer's effort to assess his proper tax liability. Sec. 1.6664-1(b)(1), Income Tax Regs.”

Gaston v. Comm'r, 2016 T.C. Summary Opinion 41 (Tax Ct. 2016). · cites it 2× “Further, respondent established that petitioner failed to keep books and records to adequately substantiate her claimed deductions for both 2009 and 2010.”

Levine v. Comm'r, 2017 T.C. Summary Opinion 60 (Tax Ct. 2017). · cites it 2× “As explained below, petitioner did not show that he acted with reasonable cause and in good *93 faith with respect to the underpayment of tax for 2011.”

Rice v. Comm'r, 1999 T.C. Memo. 65 (Tax Ct. 1999). · cites it 4× “6664-3 apply to returns the due date of which * * * is after December 31, 1989." Thus, because petitioner's 1989 Federal income tax return was due on April 15, 1990, the cited regulations govern the definition of an underpayment with respect to respondent's penalty determination.”

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