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corporation to give corporate funds to the shareholder's
friend(s) from whom they would not seek formal collection, it
is difficult to find that there was a true debtor-creditor
relationship. Just as significantly, petitioners have failed
to show that the advances were worthless during the years the
bad debt deductions were claimed.
Respondent determined additions to tax under section
6653(a)(1) and (2) and section 6661 for each taxable year in
issue. Section 6653(a)(1) provides for a 5-percent addition on
the entire underpayment if any part of the underpayment is due
to negligence or intentional disregard of rules or regulations.
Section 6653(a)(2) provides for an additional amount equal to
50 percent of the interest payable with respect to the portion
of the underpayment attributable to negligence.
Negligence is the lack of due care or failure to do what a
reasonable and ordinarily prudent person would do under the
circumstances. Neely v. Commissioner, 85 T.C. 934, 937 (1985).
Petitioners have the burden of showing that their underpayment
was not due to negligence or intentional disregard of rules or
regulations. Rule 142(a); Welch v. Helvering, 290 U.S. 111
(1933); Bixby v. Commissioner, 58 T.C. 757, 791-792 (1972).
Both petitioners failed to maintain adequate records. The
failure to properly segregate personal and business
expenditures and the method of yearend allocation further
exacerbate the inadequacy of petitioners' records. It was the
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