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On May 7, 1995, respondent issued a notice of deficiency in
which he determined that petitioner was liable for additions to
tax for negligence or intentional disregard of rules or
regulations under section 6653(a)(1) and (2) and for substantial
understatement of tax under section 6661(a) with respect to his
1983 taxable year.
OPINION
Negligence
It is respondent's position that petitioner was negligent in
claiming a loss and investment tax credit from his investment in
Ridge Energy.2 Petitioner claims that he is not liable for the
additions to tax for negligence because he reasonably relied on
Mr. Coscia's advice when he invested in Ridge Energy and when he
claimed a loss and credit with respect to the same. To support
his contention that his reliance was reasonably based, petitioner
points to his age and limited investment experience and to the
fact that Mr. Coscia had been his accountant for 4 years at the
time of his investment.
Section 6653(a)(1) imposes an addition to tax equal to
5 percent of any underpayment of tax if any part of the
underpayment is due to negligence. In addition, section
6653(a)(2) adds to the tax an amount equal to 50 percent of the
2 Respondent does not argue that petitioner is liable for
the additions to tax under sec. 6653(a) due to intentional
disregard of rules or regulations.
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