[Code of Federal Regulations]
[Title 26, Volume 13]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR]

[Page 507-508]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
Procedure and Administration--Table of Contents
 
Sec.  1.6664-1  Accuracy-related and fraud penalties; definitions and 
special rules.

    (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 Sec.  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 Sec.  
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 Sec.  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

[[Page 508]]

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), Sec.  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, Sec.  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, Sec.  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.

[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]