- 7 - interest payable with respect to that portion of the underpayment attributable to negligence. "Negligence" is defined as a lack of due care or a failure to act in a reasonable and prudent manner under the circumstances. Freytag v. Commissioner, 89 T.C. 849, 887 (1987), affd. 904 F.2d 1011 (5th Cir. 1990), affd. on another issue 501 U.S. 868 (1991). Petitioner bears the burden of proving that his actions in claiming the loss and credit were not negligent. Rule 142(a); Freytag v. Commissioner, supra at 887. "When considering the negligence addition, we evaluate the particular facts of each case, judging the relative sophistication of the taxpayers as well as the manner in which the taxpayers approached their investment." Turner v. Commissioner, T.C. Memo. 1995-363. Under certain circumstances, reliance on professional advice may provide an adequate excuse for a taxpayer's actions under section 6653(a); however "standing alone, [it] is not an absolute defense to negligence, but rather a factor to be considered." Freytag v. Commissioner, supra at 888. The taxpayer must show that his expert had the relevant expertise and knowledge of pertinent facts to give competent advice. Goldman v. Commissioner, 39 F.3d 402, 408 (2d Cir. 1994), affg. T.C. Memo. 1993-480; Freytag v. Commissioner, supra at 888. "Reliance on expert advice is not reasonable where the 'expert' relied on knows nothing about the business in which the taxpayer invested." Goldman v. Commissioner, supra at 408. In addition, the taxpayer must notPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011