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deduct their cash investment in Century based upon principles
of equity. See Paxman v. Commissioner, 50 T.C. 567, 576 (1968),
affd. 414 F.2d 265 (10th Cir. 1969); Farmer v. Commissioner, T.C.
Memo. 1994-342.
2. Whether Petitioners Were Negligent
Negligence is a lack of due care or failure to do what a
reasonable and ordinarily prudent person would do under the
circumstances. Zmuda v. Commissioner, 731 F.2d 1417, 1422 (9th
Cir. 1984), affg. 79 T.C. 714 (1982); Marcello v. Commissioner,
380 F.2d 499, 506 (5th Cir. 1967), affg. in part and remanding
in part 43 T.C. 168 (1964) and T.C. Memo. 1964-299; Neely v.
Commissioner, 85 T.C. 934, 947 (1985). To prevail on the issue
of negligence, petitioners must prove that their actions in
connection with this transaction were reasonable in light of
their experience and business sophistication. Avellini v.
Commissioner, T.C. Memo. 1995-489; Lucas v. Commissioner, T.C.
Memo. 1995-341; Poplar v. Commissioner, T.C. Memo. 1995-337; see
Henry Schwartz Corp. v. Commissioner, 60 T.C. 728, 740 (1973).
If a taxpayer is misguided, is unsophisticated in tax law, and
acts in good faith, we may conclude that he or she is not liable
for the addition to tax for negligence. Collins v. Commissioner,
857 F.2d 1383, 1386 (9th Cir. 1988), affg. Dister v.
Commissioner, T.C. Memo. 1987-217; Hanson v. Commissioner, 820
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