Kern S. and Soledad D. Smith - Page 6

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          merely by designating his business income as "trust" income he              
          would not have to report it.  Petitioner did not file a trust               
          return, nor did either petitioner consult an accountant or an               
          attorney to determine whether the $183,585 should be reported.              
          In short, petitioners did not do what a reasonable and ordinarily           
          prudent person would do under the circumstances.  Neely v.                  
          Commissioner, 85 T.C. 934, 947 (1985).  Moreover, though                    
          instructed on line 12 of Form 1040 to do so, petitioners did not            
          file a Schedule C, even as to the business income of $16,147                
          which they did report.  We find that petitioners are liable for             
          the negligence penalty.                                                     
               To reflect the foregoing,                                              


                                            Decision will be entered                 
                                   under Rule 155.                                    




















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