- 7 -
The first issue is whether petitioners are liable for the
additions to tax for negligence under section 6653(a)(1) and (2)
for both years at issue. Section 6653(a)(1) imposes an addition
to tax in an amount equal to 5 percent of an underpayment of tax
if any part of the underpayment is due to negligence or
intentional disregard of rules or regulations. Section
6653(a)(2) imposes another addition to tax in an amount equal to
50 percent of the interest due on the portion of the underpayment
attributable to negligence or intentional disregard of rules or
regulations. Respondent’s determinations in a notice of
deficiency are presumed correct, and petitioners must establish
otherwise. See Rule 142(a); Welch v. Helvering, 290 U.S. 111,
115 (1933); cf. sec. 7491(c).7 Respondent determined that
petitioners’ underpayments were due to negligence. Petitioners,
therefore, have the burden of proving they were not negligent in
deducting their share of the partnership’s losses. See Estate of
Mason v. Commissioner, 64 T.C. 651, 663 (1975), affd. 566 F.2d 2
(6th Cir. 1977); Bixby v. Commissioner, 58 T.C. 757, 791 (1972);
7 The Internal Revenue Service Restructuring & Reform Act
of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added
sec. 7491(c), which shifts the burden of proof to the Secretary
with respect to a taxpayer’s liability for penalties and
additions to tax in court proceedings arising in connection with
examinations commencing after July 22, 1998. Petitioners do not
contend that their examination commenced after July 22, 1998, or
that sec. 7491 is applicable in these cases.
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