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Discussion
Section 6653(a) for 1979 and 1980 and section 6653(a)(1) for
1981, 1982, and 1983 impose an addition to tax equal to 5 percent
of the underpayment if any part of any underpayment in tax is due
to negligence or disregard of rules or regulations. Section
6653(a)(2) for 1981, 1982, and 1983 imposes an addition to tax
equal to 50 percent of the interest payable with respect to the
portion of the underpayment attributable to negligence or
disregard of rules or regulations. Petitioners bear the burden
of proving that any underpayment was not due to negligence. Rule
142(a); Bixby v. Commissioner, 58 T.C. 757, 791-792 (1972).
Negligence is defined as the failure to exercise the due
care that a reasonable and ordinarily prudent person would employ
under the circumstances. Neely v. Commissioner, 85 T.C. 934, 947
(1985). The question is whether a particular taxpayer's actions
in connection with the transactions were reasonable in light of
his or her experience and the nature of the investment or
business. Henry Schwartz Corp. v. Commissioner, 60 T.C. 728, 740
(1973). When considering the negligence addition to tax, we
evaluate the particular facts of each case, judging the relative
sophistication of the taxpayers, as well as the manner in which
they approached their investment. McPike v. Commissioner, T.C.
Memo. 1996-46. Compare Spears v. Commissioner, T.C. Memo. 1996-
341 with Zidanich v. Commissioner, T.C. Memo. 1995-382.
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