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negligence or disregard of rules or regulations. Sec. 6662(a)
and (b)(1). The term "negligence" includes any failure to do
what a reasonable and ordinarily prudent person would do under
the same circumstances. Neely v. Commissioner, 85 T.C. 934, 947
(1985). The term "disregard" includes any careless, reckless, or
intentional disregard. Sec. 6662(c). The penalty does not apply
to any portion of an underpayment for which there was reasonable
cause and with respect to which the taxpayer acted in good faith.
Sec. 6664(c)(1).
Petitioners failed to prove that they were not negligent.
They failed to report taxable interest income received by them in
1990. They claimed deductions for self-employment tax on their
returns for 1990 and 1991 even though they are not, as a matter
of law, entitled to such deductions. They claimed casualty loss
deductions in 1991 to which they were not entitled. Worksheets
prepared by them in support of their claimed casualty loss caused
by the February flood contained duplications of the claimed
losses relating to individual items. Worksheets prepared by them
in support of their claimed casualty loss caused by the April
flood contained numerous duplications of individual items which
petitioners had included in their claimed loss as a result of the
February flood.
Accordingly, except for the $6,000 business expense
deduction allowed for the litigation settlement, we hold that
petitioners are liable for the accuracy-related penalties for
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