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Respondent also determined additions to tax for negligence
under section 6653(a)(1)(A) and (B) (for 1987) and section
6653(a)(1) (for 1988), asserting that petitioner's underpayment
of income taxes in each year was due to negligence or intentional
disregard of rules or regulations. For the respective years,
section 6653(a)(1)(A) and section 6653(a)(1) impose an addition
to tax equal to 5 percent of the underpayment if any part of the
underpayment is due to negligence. For petitioner's 1987 taxable
year, section 6653(a)(1)(B) imposes an addition to tax equal to
50 percent of the interest payable on the amount of the
underpayment that is due to negligence. With respect to all of
these additions to tax, negligence includes a lack of due care or
a failure to do what a reasonable and ordinary prudent person
would do under the circumstances. Neely v. Commissioner, 85 T.C.
934, 947 (1985). Petitioner bears the burden of proving that
respondent's determination of negligence is erroneous. Rule
142(a); Bixby v. Commissioner, 58 T.C. 757, 791-792 (1972).
Following our review of the record, and in light of the
persuasive testimony of Mr. Roven and Ms. Martin, we hold that
petitioner is not liable for any of the additions to tax
determined by respondent.6 We believe that petitioner (through
its management) acted as a reasonable and prudent person would
6 This holding applies to the additions to tax as they
relate to both the determinations at issue and the determinations
that were conceded by petitioner.
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