- 33 -                                         
          discussed in the negligence portion of this opinion, Part D,                
          infra, we do not think that petitioner acted with reasonable                
          cause and in good faith with respect to the substantial                     
          understatement.  Accordingly, we sustain respondent's                       
          determination that petitioner is liable for the accuracy-related            
          penalty under section 6662(a) based on the understatement of                
          income tax for 1989.8                                                       
          D.   Negligence                                                             
               In the notices of deficiency, respondent determined that               
          petitioner was liable for the accuracy-related penalty for                  
          negligence for both 1989 and 1990.                                          
               Negligence may be indicated by the failure (1) to make a               
          reasonable attempt to comply with applicable provisions of the              
          Internal Revenue Code and the supporting regulations thereunder,            
          (2) to exercise ordinary and reasonable care in preparing a tax             
          return, (3) to keep adequate books and records, or (4) to                   
          properly substantiate items.  Sec. 1.6662-3(b) and (c), Income              
          Tax Regs.  Negligence also may be indicated by the failure to do            
          what a reasonable and ordinarily prudent person would do under              
          the circumstances.  Neely v. Commissioner, 85 T.C. 934, 947                 
          (1985).                                                                     
               8 In view of our conclusion, we find it unnecessary to                 
          decide whether the plan or arrangement involved in the present              
          cases constituted a "tax shelter" within the meaning of sec.                
          6662(d)(2)(C)(iii).  However, see infra note 9 and the associated           
          text.                                                                       
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