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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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