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Negligence is a lack of due care or failure to do what a
reasonable and ordinarily prudent person would do 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). Failure to keep adequate records is
evidence of negligence. Marcello v. Commissioner, 380 F.2d 499,
506-507 (5th Cir. 1967), affg. in part and remanding in part 43
T.C. 168 (1964) and T.C. Memo. 1964-299; Magnon v. Commissioner,
73 T.C. 980 (1980). A taxpayer is required to maintain records
sufficient to correctly prepare his or her tax return. Sec.
1.6001-1(a), Income Tax Regs. Petitioners bear the burden of
proving that they are not liable for the accuracy-related
penalty. Rule 142(a).
Petitioners concede that they should not have deducted
interest paid by the corporation for each year in issue. They
also concede that they commingled funds, had inadequate records,
and made accounting errors. Petitioner did not coordinate
petitioners' and the corporation's returns to avoid deducting the
same items twice. Petitioner gave Sheffield summary sheets from
which Sheffield prepared petitioners' tax returns. Sheffield did
not have books and records from petitioner's businesses.
Petitioner used a different return preparer to prepare the
corporate income tax returns. Petitioner did not ensure that the
two preparers handled various items consistently.
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