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been in actuality contributions to capital. Based on the record,
we conclude that petitioners Glassley and Houser knew, or should
have known, that JDP's payments to HJI were not made for the
purposes stated in the R & D Agreement. We conclude further that
they nonetheless deliberately disregarded respondent's rules and
regulations in claiming as research or experimentation
expenditures on their tax returns for the years in issue the bulk
of their capital contributions for the right to participate in
HJI's jojoba farming enterprise.
Accordingly, we hold that petitioners Glassley and Houser
are liable for the negligence additions to tax under the
provisions of section 6653(a)(1) and (2). Respondent is
sustained on this issue.
2. Dr. Mahoney
Dr. Mahoney did not testify at trial and he has presented no
evidence on this issue. Consequently, Dr. Mahoney has failed to
carry his burden of showing that, in claiming the disputed
deductions, he was not negligent or did not intentionally
disregard respondent's rules and regulations. Accordingly, he
also is liable for the negligence additions to tax under the
provisions of section 6653(a)(1) and (2). Respondent is
sustained on this issue.
C. Increased Interest
Respondent determined in the notices of deficiency that the
increased interest under section 6621(c) applied to petitioners
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