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amount of experience in the nuts, bolts, and fasteners
distribution business. She had sufficient financial resources to
form a competing firm, either alone or with co-owners. She had
good relationships with customers and suppliers. Since in 1988
she worked primarily with suppliers, we believe her competitive
impact would not have been a serious problem for petitioner if
she operated alone. However, she could probably have offset this
by affiliating with others as she did when she and others formed
petitioner, and continuing to focus on suppliers. She knew how
to surround herself with the necessary personnel, including
salespeople, to establish a successful business. Considering the
entire record, we conclude that the value of the covenant not to
compete was $324,100.
7. Additions to Tax
a. Negligence
Respondent determined that petitioner is liable for the
addition to tax for negligence under section 6653(a) for its tax
year ended June 30, 1989. Petitioner has the burden of proving
that it was not negligent. Neely v. Commissioner, 85 T.C. 934,
947 (1985).
Section 6653(a) imposes an addition to tax equal to 5
percent of the underpayment of tax if any part of the
underpayment is due to negligence or intentional disregard of
rules or regulations. Negligence includes a failure to make a
reasonable attempt to comply with the provisions of the Internal
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