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The final issue for decision is whether petitioners are
liable for the accuracy-related penalty under section 6662(a) for
negligence or disregard of rules or regulations. Section 6662(a)
provides for an addition to tax equal to 20 percent of the
portion of the underpayment to which the section applies. Under
section 6662(c), "'negligence' includes any 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." Negligence is the 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). Under section 6664(c), the penalty under
section 6662(a) shall not be imposed with respect to any portion
of the underpayment if it is shown that there was reasonable
cause for the underpayment, and that the taxpayer acted in good
faith.
Petitioners claimed Schedule C deductions in the amount of
$25,226 with respect to an activity of petitioner's that neither
had commenced nor was being conducted on a regular and continuous
basis during the year at issue. Petitioners also claimed a
$12,500 bad debt deduction for a debt that they reported as a
8(...continued)
general loss provisions of sec. 165. Therefore, petitioners here
cannot obtain any relief under sec. 165. Moreover, no
identifiable event occurred to fix the amount of any loss so as
to render it deductible under sec. 165.
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