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For the 1988 tax year, respondent determined that
petitioners, pursuant to sections 6653(a)(1) and 6661, were
liable for additions to tax for negligence and substantial
understatements. For the 1989 through 1991 tax years, respondent
determined that petitioners, pursuant to section 6662(a), were
liable for accuracy-related penalties based on either negligence
or substantial understatements. As with the deficiencies,
petitioners bear the burden of proving that these determinations
are erroneous. See Rule 142(a); Bixby v. Commissioner, 58 T.C.
757, 791 (1972).
A. Additions to Tax for Negligence
Section 6653(a)(1), applicable to petitioners' 1988 tax
year, provides that if any part of any underpayment of tax
required to be shown on a return is due to negligence, there
shall be added to the tax an amount equal to 5 percent of the
underpayment. The term "negligence" is defined as the failure to
exercise the care that a reasonable and ordinarily prudent person
would exercise under the circumstances. Zmuda v. Commissioner,
731 F.2d 1417, 1422 (9th Cir. 1984), affg. 79 T.C. 714 (1982);
Neely v. Commissioner, 85 T.C. 934, 947 (1985).
Petitioners offered no plausible explanation for their
failure to report significant amounts of income. As a result, we
conclude that they are liable for the section 6653(a) additions
to tax.
B. Additions to Tax for Substantial Understatement
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