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
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