- 9 -
through 1983. Petitioners concede they are liable for the income
tax deficiencies exclusive of additions to tax. However,
petitioner argues that the circumstances of this case differ from
those of the taxpayers in Charlton in that he was not negligent.
Therefore, petitioner contends that he should not be held liable
for additions to tax as determined by respondent.
Section 6653(a) for taxable year 1980 and section 6653(a)(1)
for taxable years 1981, 1982, and 1983, provide that if any
portion of an underpayment of tax is due to negligence or
intentional disregard of rules and regulations, an amount equal
to 5 percent of the underpayment is added to the tax. Section
6653(a)(2) for taxable years 1981 through 1983 provides for an
addition to tax equal to 50 percent of the interest on the
portion of the negligence. Negligence is defined as the failure
to exercise the due care that a reasonable and ordinarily prudent
person would employ under the circumstances. Zmuda v.
Commissioner, 731 F.2d 1417, 1422 (9th Cir. 1984), affg. 79 T.C.
714 (1982); Neely v. Commissioner, 85 T.C. 934, 947 (1985). The
question is whether a particular taxpayer's actions in connection
with the transactions were reasonable in light of his experience
and the nature of the investment or business. See Henry Schwartz
Corp. v. Commissioner, 60 T.C. 728, 740 (1973). Respondent's
determinations are presumed correct and petitioners bear the
burden of establishing otherwise. Hall v. Commissioner, 729 F.2d
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011