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E. Additions to Tax
1. Negligence8
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). Respondent contends that the Wises were
negligent in reporting the items of income, losses, and expenses,
that they claimed on their 1988 tax return. To avoid liability
for negligence, the Wises must show that they acted reasonably
and prudently and exercised due care in reporting the above items
on their 1988 tax return in light of their experience and
business sophistication. Avellini v. Commissioner, T.C. Memo.
1995-489; Lucas v. Commissioner, T.C. Memo. 1995-341; Poplar v.
Commissioner, T.C. Memo. 1995-337; see Henry Schwartz Corp. v.
Commissioner, 60 T.C. 728, 740 (1973).
Most of the adjustments that respondent made to the Wises’
1988 tax return relate to the timing of reporting income and
expenses. Those income items and expenses relate to journal
entries that were meant to increase the Wises’ and Eicher's debt
basis in WRI so that petitioners could claim pass-through losses
8We deem Eicher to have conceded the negligence additions to
tax. See note 4, above.
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