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We disagree. See Hudson v. United States, 522 U.S. __,
118 S. Ct. 488 (1997); Kennedy v. Mendoza-Martinez, 372 U.S. 144
(1963); Helvering v. Mitchell, 303 U.S. 391 (1938); Grimes v.
Commissioner, 82 F.3d 286 (9th Cir. 1996); and I & O Publg. Co.
v. Commissioner, 131 F.3d 1314 (9th Cir. 1997), affg. Ward v.
Commissioner, T.C. Memo. 1995-286, which are controlling on this
issue in favor of respondent.
Because a part of petitioners' underpayment of tax for each
year in issue was due to fraud, the assessment of tax
deficiencies for each year is not barred by the statute of
limitations. Sec. 6501(c)(1); Meier v. Commissioner, 91 T.C.
273, 303 (1988).
Respondent determined that the negligence addition to tax
under section 6653(a) applies to the portion of the deficiencies
in tax for 1986, 1987, and 1988 that are not subject to the fraud
addition to tax (namely, the entire amount of the deficiencies
other than that portion attributable to petitioner’s share of Cal
Ben's unreported sales). The portions of the deficiencies
against which the negligence additions to tax were determined
relate primarily to unsubstantiated claimed partnership business
expenses and the inclusion of repairs in petitioners' calculation
of the tax basis on the Aptos residence, issues which the parties
have settled.
The negligence addition to tax will apply if, among other
things, the taxpayer fails to maintain adequate books and records
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