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repeated below, is relevant to the additions to tax and increased
interest at issue herein.
For the years before us, section 6653(a)(1) provides additions
to tax equal to 5 percent of the underpayments if any part of the
underpayments are due to negligence or intentional disregard of
rules or regulations. Section 6653(a)(2) provides an addition to
tax of 50 percent of the interest on the portion of the
underpayment attributable to negligence. Negligence under section
6653(a)(1) and (2) constitutes the failure to exercise due care or
the failure to do what a reasonable or 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).
With regard to our analysis of the additions to tax, it is
important to note that one of respondent's own expert witnesses
acknowledges that investors may have been significantly and
reasonably influenced by the energy price hysteria that existed in
the late 1970's and early 1980's to invest in EOR technology. A
number of industry and governmental reports and publications
encouraged investors to invest in EOR technology. Various
governmental incentives, funding, and subsidies were directed at
development of EOR technology. In the early 1980's, a large amount
of money was spent on the development of technology for the
recovery of oil from shale and synthetic fuels in spite of the fact
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