Bevel M. and Patricia N. Hoffpauir - Page 9

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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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