Douglass H. and Suzanne M. Bartley - Page 22

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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              
               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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