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intentional disregard of rules and regulations. Negligence is
defined as the "`lack of due care or failure to do what a
reasonable and ordinarily prudent person would do under the
circumstances.'" See Neely v. Commissioner, 85 T.C. 934, 947
(1985) (quoting Marcello v. Commissioner, 380 F.2d 499, 506 (5th
Cir. 1967), affg. in part and remanding per curiam 43 T.C. 168
(1964)).
Petitioners argue that the portion of the negligence penalty
attributable to the gain on the residence is "unjustified because
the gain is not taxable in the first place and because petitioners
were not negligent in any event in that they did report the sale
transaction and its details in a timely fashion." We disagree.
Petitioner was a well-educated attorney who spent a
substantial part of his career in tax law. He is a former
Wisconsin Tax Appeals commissioner. It is evident that he was
familiar with Federal and State tax law. Although petitioner was
fully aware of petitioners' duty to report the capital gain on the
Mequon residence, petitioners failed to file Form 2119 with their
1993 income tax return.11 The taxpayer must file Form 2119 to
notify the IRS of the sale for the tax year in which the old
residence is sold, whether or not gain is realized. Sec. 1.1034-
11 Generally, cash basis taxpayers must include all items
of income in the gross income for the taxable year in which
actually or constructively received. Sec. 451(a); sec. 1.451-
1(a), Income Tax Regs.
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