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shareholder with tax-free and interest-free access to profits
attributable to policies issued through the shareholder's
dealership. Messrs. McCurley and Hall would not repay their
advances unless it was in their economic interests to do so.
Petitioners have not persuaded us that it would ever be in their
economic interests to repay these advances. Mr. McCurley, Mr.
Hall, and SDI viewed the advances as permanent distributions with
the understanding that there was a remote possibility that SDI
would demand repayment. Accordingly, we hold that the advances
to Messrs. McCurley and Hall were constructive dividends.
II. Penalties and Addition to Tax
A. Section 6662 Penalties for Negligence
Section 6662(a), applicable to the McCurleys' 1991 and 1992
tax years and the Halls' 1989, 1990, and 1991 tax years, provides
for an accuracy-related penalty equal to 20 percent of the
portion of any underpayment to which the section applies. The
section applies to, among other items, the portion of an
underpayment attributable to negligence or disregard of rules or
regulations. Sec. 6662(b)(1). Negligence has been defined as
the lack of due care or failure to do what a reasonable and
ordinarily prudent person would do under the circumstances.
Neely v. Commissioner, 85 T.C. 934, 947 (1985). It includes the
failure to make a reasonable attempt to comply with the Internal
Revenue Code. Sec. 6662(c). Section 6664(c) states that the
accuracy-related penalty for negligence does not apply to any
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