Derwyn J. Booker - Page 20

          self-employment income to be greater than $400 in taxable year              
          1984.  Accordingly, respondent is sustained on this issue.                  
          Issue 5.  Negligence                                                        
               Section 6653(a)(1) provides for an addition to tax equal to            
          5 percent of any underpayment if any part of the underpayment is            
          due to negligence or intentional disregard of rules and                     
          regulations.  Negligence is defined as a lack of due care or the            
          failure to act as a reasonable person would act under similar               
          circumstances.  Neely v. Commissioner, 85 T.C. 934, 947 (1985).             
          Petitioner bears the burden of proving that no part of the                  
          underpayment for the year at issue is due to negligence or                  
          intentional disregard of rules and regulations.  Rule 142(a);               
          Bixby v. Commissioner, 58 T.C. 757 (1972).                                  
               Petitioner argues that he did not rely on the                          
          representations made by Encore in determining whether to enter              
          into the lease transaction.  Petitioner contends that he sought             
          the professional advice of a number of individuals with respect             
          to his investment in Encore and determined that Encore had a good           
          reputation, that the tax advantages claimed by Encore were                  
          supported by law, and that the masters were of marketable                   
          quality.  Petitioner argues that he did what a reasonable person            
          would have done under the circumstances.                                    
               Petitioner had no experience in the record industry prior to           
          his involvement with Encore.  Petitioner was unfamiliar with the            
          recording artists and failed to seek an independent appraisal of            

Page:  Previous  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  Next

Last modified: May 25, 2011