- 32 -
their trade or business.
VI. Accuracy-related Penalties
Respondent determined that petitioners are liable for
accuracy-related penalties under section 6662(a). Section
6662(a) imposes a penalty equal to 20 percent of the underpayment
of tax attributable to one or more of the items set forth in
section 6662(b). Respondent asserts that the entire
underpayments in issue were due to petitioners' negligence or
disregard of rules or regulations. Sec. 6662(b)(1).
Negligence has been defined as 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)
(citing Marcello v. Commissioner, 380 F.2d 499, 506 (5th Cir.
1967)). Respondent's determinations are presumed correct, and
petitioners bear the burden of proving otherwise. Rule 142(a);
Luman v. Commissioner, 79 T.C. 846, 860-861 (1982).
Failure to keep adequate records is evidence of negligence.
Marcello v. Commissioner, supra at 507; Magnon v. Commissioner,
73 T.C. 980, 1008 (1980). Petitioners here did not maintain
adequate records regarding the amount of their sales.
Petitioners argue that their ledgers adequately reflected their
records. They point out that the accountants who prepared their
returns found the records adequate, as did one of their expert
witnesses, who is an accountant, a former Internal Revenue
Service supervisor, and a veteran of many IRS audits.
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