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We have sustained respondent's disallowance of certain items
for each of the years in issue. For none of those years have
petitioners carried their burden of showing the absence of an
underpayment. Accordingly, we find some underpayment for each of
those years. That is not sufficient for us to determine any
addition to tax on account of negligence, however. We must
determine whether petitioners were indeed negligent. Negligence
for purposes of section 6653(a) is the lack of due care or the
failure to do what a reasonable and ordinarily prudent person
would do under the circumstances. Neely v. Commissioner, 85 T.C.
934, 947 (1985).
Petitioners focus on the computer equipment activity and the
telecommunications activity and argue first that they cannot be
negligent in claiming their losses therefrom because respondent
has stipulated that the activities were not a sham, that
petitioner had a business purpose, that the investments had
substance, and that petitioner acquired the benefits and burdens
of ownership. We do not agree with petitioners. The consequence
of that stipulation is to limit our inquiry with regard to the
activities to the question of whether petitioners were negligent
in taking the position that petitioner was at risk within the
meaning of section 465(a) with regard to the installment notes.
With regard to that question, petitioners argue:
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