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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
inventory.
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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