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petitioners filed their 1981 return in August 1982 and claimed an
overpayment of $12,255.
During 1981, petitioner Arnold S. Jacobs acquired a 1.547-
percent interest in the Clearwater Group (Clearwater), a limited
partnership that leased six Sentinel expanded polyethylene (EPE)
recyclers. Respondent determined the deficiency and additions to
tax for petitioners for 1981 as a consequence of disallowance of
a loss deduction and investment tax and business energy credits
claimed by petitioners on their 1981 return and resulting from
their interest in Clearwater. The parties resolved all of the
issues raised by the notice of deficiency except for the
application of section 6653(a)(2).
Section 6653(a)(2) was added to the Code by section
722(b)(1) of the Economic Recovery Tax Act of 1981 (ERTA), Pub.
L. 97-34, 95 Stat. 172, 342. Under this section, if any part of
an underpayment of tax is due to negligence or intentional
disregard of the rules or regulations, there shall be added to
the tax, in addition to the 5-percent addition provided by
section 6653(a)(1), an amount equal to 50 percent of the interest
payable under section 6601 with respect to the portion of such
underpayment attributable to negligence. The section 6653(a)(2)
addition to tax is imposed for the period beginning on the last
day prescribed by law for payment of such underpayment
(determined without regard to any extension) and ending on the
date of the assessment of the tax (or, if earlier, the date of
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