Charles A. Ballard - Page 18

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          III.  Additions to Tax                                                      
               A.  Negligence                                                         
               Respondent has determined additions to tax under section               
          6653(a)(1)(A) and (B) for both 1986 and 1987.  Section                      
          6653(a)(1)(A) imposes an addition to tax equal to 5 percent of              
          the entire underpayment if any portion of such underpayment is              
          due to negligence.  Section 6653(a)(1)(B) imposes an addition to            
          tax equal to 50 percent of the interest payable under section               
          6601 with respect to the portion of the underpayment due to                 
          negligence.  Negligence is lack of due care or failure to do what           
          a reasonable and ordinarily prudent person would do under the               
          circumstances.  E.g., Neely v. Commissioner, 85 T.C. 934, 947               
          (1985).                                                                     
               Petitioner was unable to carry his burden of proving that              
          Ballard Marine had the objective of making a profit.  However,              
          the mere fact that petitioner’s proof was inadequate does not               
          require us to find that the underpayment with respect to the                
          charter activity was due to negligence.  In another recent yacht            
          case, we found no negligence based in part on the passive role of           
          the taxpayer in the decision to engage in the charter activity.             
          Antonides v. Commissioner, supra at 700.  Petitioner’s role here            
          certainly was not passive.  Nevertheless, we find another                   
          mitigating circumstance.  Both Ballard Marine’s and petitioner’s            
          returns were prepared by an employee of Barry M. Strauss                    
          Associates, Ltd. (Associates).  Associates had been retained by             




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