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Next, we consider whether petitioners are liable for a
negligence addition under section 6653(a)(1) for 1988 and/or a
penalty under section 6662(a) for 1989. For 1988, the addition
amounts to 5 percent of any underpayment, and for 1989 the
penalty amounts to 20 percent of the portion of the underpayment
attributable to negligence. In that regard, respondent
determined that the entire underpayment is due to negligence.
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).
Petitioners, one of whom is a certified public accountant
and both of whom have experience in tax return preparation,
failed to report fee income and income from other sources. In
addition, for each year, petitioners reported a portion of
diverted refund checks of a client as though it were income from
farming, from which, in 1 year, they claimed a cost of goods sold
that they now concede. Their actions belie any possibility of
reasonableness in this setting. Accordingly, we hold that
petitioners are liable for negligence for 1988 and with respect
to the entire underpayment redetermined for 1989.
Finally, petitioners claimed at trial that they are entitled
to depreciation on cattle for 1988 and 1989. In support of their
claim, petitioners produced a check and a note, each in the
amount of $12,950 and dated June 17, 1989. On the memo portion
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