Loren F. Paullus and Donna Paullus - Page 36

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          unit 10 property, that activity did not rise to the level of a              
          trade or business.  Instead, the real estate aspect was                     
          incidental to the primary business (golf) and constituted an                
          investment so that the property was not part of Ridgemark’s                 
               Accordingly, we hold that Ridgemark was entitled to the                
          nonrecognition of income from the sale of the unit 10 property              
          under section 1031, and thus there is no underpayment to which              
          section 6662(a) would be applied.                                           
               Finally, we consider whether petitioners are liable for the            
          accuracy-related penalty for negligence under section 6662.                 
          Respondent determined that they were negligent or intentionally             
          disregarded rules and regulations and that the section 6662(a)              
          20-percent penalty should apply.  Sec. 6662(b)(1).                          
               Negligence has been defined as the failure to make a                   
          reasonable attempt to comply with the provisions of this title,             
          and the term “disregard” includes any careless, reckless, or                
          intentional disregard.  Sec. 6662(c).  Petitioners bear the                 
          burden of showing that they were not negligent.  Rule 142(a);               
          Bixby v. Commissioner, 58 T.C. 757, 791-792 (1972).                         
               Respondent determined an accuracy-related penalty of $10,690           
          due to negligence or disregard of rules or regulations.  Sec.               
          6662(b)(1) and (c).  In the notice of deficiency, respondent                
          determined that the depreciation deduction claimed by petitioners           
          on their 1989 Schedule F exceeded the allowable amount by                   

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