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percent of the underpayment for 1989. Respondent determined that
the 20-percent addition under section 6662 should apply with
respect to the entire underpayment for 1989.
Negligence has been defined as the failure to exercise the
due care that a reasonable and ordinarily prudent person would do
under the circumstances. Neely v. Commissioner, 85 T.C. 934, 947
(1985). Petitioners bear the burden of showing that they are not
negligent. Rule 142(a); Bixby v. Commissioner, 58 T.C. 757, 791-
792 (1972).
Petitioners argue that NITCO and the Mussmans are not liable
for additions to tax for negligence. Their contentions are as
follows:
Respondent has not rebutted any of the facts
supporting the reasonableness of NITCO's accumulations.
Imposition of the * * * [accumulated earnings tax] and
any additional penalty is therefore unwarranted.
Similarly, imposing penalties for deducting the
allegedly nondeductible attorneys' fees and other costs
attributable to billing errors by outside attorneys or
oversight by the independent accountant would also be
improper. None of any underpayment ultimately
determined is attributable to negligence or intentional
disregard. * * *
We have previously held that NITCO is liable for accumulated
earnings tax for 1987, 1988, and 1989, because NITCO accumulated
its earnings beyond the reasonable needs of the business and was
availed of for the purpose of avoiding income tax with respect to
its shareholders. We further held that, for 1987, 1988, and
1989, substantial business deductions for legal expenses that
NITCO claimed were not allowable to NITCO under section 162,
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