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In 1986, petitioners invested $3,000 in a partnership known
as Irving & Co. Petitioners invested this money with Fred
Schneider (Schneider), their accountant and principal of
Schneider & Associates. Schneider was the promoter of Irving &
Co. and one of its members. On their 1986 Federal income tax
return, petitioners reported a loss in the amount of $15,432,
which represented their net loss from Irving & Co.
Section 6653(a)(1)(A) provides that if any part of any
underpayment of tax is due to negligence or intentional disregard
of rules or regulations, there shall be added to the tax an
amount equal to 5 percent of the underpayment. Section
6653(a)(1)(B) provides for an addition to tax in the amount of 50
percent of the interest payable under section 6601 with respect
to the portion of such underpayment which is attributable to
negligence.
Negligence is defined as the lack of due care or the failure
to do what a reasonable and ordinarily prudent person would do
under the circumstances. Neely v. Commissioner, 85 T.C. 934, 947
(1985). Petitioners bear the burden of proving that respondent's
negligence determination is erroneous. Rule 142(a); Bixby v.
Commissioner, 58 T.C. 757, 791 (1972).
Petitioners argue they are not liable for the negligence
additions to tax because they relied on their accountant for
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