Midwest Industrial Supply, Inc. - Page 9

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          Sec. 6653(a)(1)(A) and (B).  For petitioner's 1988 tax year, the addition to
          tax is equal to 5 percent of the underpayment if any portion of the         
          underpayment is attributable to negligence or disregard of rules or         
          regulations.  Sec. 6653(a).  We have defined negligence in this context to  
          mean "lack of due care or failure to do what a reasonable and ordinarily    
          prudent person would do under the circumstances."  Neely v. Commissioner, 85
          T.C. 934, 947 (1985) (quoting Marcello v. Commissioner, 380 F.2d 499, 506 (5th
          Cir. 1967)).                                                                
               Petitioner failed to meet its burden of proving that the underpayments 
          were not due to negligence or disregard of rules or regulations.  Petitioner
          contends that it is not responsible for the section 6653(a) additions to tax
          because it relied on a tax professional in creating the corporate sponsorship.
          To bolster its argument, petitioner cites Ewing v. Commissioner, 91 T.C. 396
          (1988), affd. without published opinion 940 F.2d 1534 (9th Cir. 1991).  In  
          Ewing, the Tax Court declined to impose additions to tax under section 6653 
          where the taxpayers had "[relied] in good faith on the attorneys to formulate
          and implement" an arrangement.  Reliance on a professional, however, will not
          shield a taxpayer from liability where the transaction giving rise to the   
          deduction lacked substance or the expert's advice was ignored in material   
          respects and was vague.  In the present case, Mr. Vitale received a general 
          letter from an attorney in California whom he had never met.  There is no   
          evidence in the record that (1) explains what information Mr. Vitale provided
          to the attorney or (2) indicates that the attorney either proposed or endorsed
          a particular plan.  Thus, the attorney did not "formulate and implement" a  
          plan, but appears merely to have provided broad comments on Mr. Vitale's idea.
          We have found that the sponsorship arrangement was designed primarily to    
          benefit Mr. Vitale, not petitioner.  Therefore, we hold that petitioner is  
          liable for the section 6653(a) additions to tax.                            

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