Leon and Belle Atkind - Page 11

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                  Section 6653(a)(1) imposes an addition to tax equal to 5                              
            percent of the underpayment if any part of an underpayment of tax                           
            is due to negligence or intentional disregard of rules or                                   
            regulations.  In cases involving negligence, an additional amount                           
            is added to the tax under section 6653(a)(2); such amount is                                
            equal to 50 percent of the interest payable with respect to the                             
            portion of the underpayment attributable to negligence.                                     
            Negligence is defined as the failure to exercise the due care                               
            that a reasonable and ordinarily prudent person would employ                                
            under the circumstances.  Neely v. Commissioner, 85 T.C. 934, 947                           
            (1985).  The question is whether a particular taxpayer's actions                            
            in connection with the transactions were reasonable in light of                             
            his experience and the nature of the investment or business.  See                           
            Henry Schwartz Corp. v. Commissioner, 60 T.C. 728, 740 (1973).                              
                  Petitioners contend that they were reasonable in claiming                             
            deductions and credits with respect to their investment in                                  
            Hyannis and attempt to distinguish the instant case from Provizer                           
            v. Commissioner, supra, by arguing:  (1) Petitioner acted                                   
            reasonably in relying upon the offering memorandum and the advice                           
            and representations of Miller and Roberts; and (2) petitioner is                            
            not a well-educated, sophisticated investor and was not seeking                             
            to shelter income through Hyannis.                                                          
                  When petitioners claimed the disallowed deductions and tax                            
            credits, they had no knowledge of the plastics or recycling                                 
            industries and no engineering or technical background.  There is                            
            nothing in the record indicating that petitioners independently                             

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