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