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Respondent determined that petitioners were liable for the
additions to tax under section 6653(a). Petitioners have the
burden of proving that respondent's determination of an addition
to tax is erroneous. Rule 142(a); Luman v. Commissioner, 79 T.C.
846, 860-861 (1982).
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).
Petitioner contends that he was reasonable in claiming
deductions and credits with respect to his investment in
Northeast and asserts that the instant case is distinguishable
from Provizer v. Commissioner, supra, in that: (1) Petitioner
acted reasonably and exercised due diligence in relying on Grant,
Roberts, and the draft opinion letter in the offering memorandum;
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