Walter Raymond Wilkerson and Susan Gee Wilkerson - Page 6

                                        - 6 -                                         

               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             

Page:  Previous  1  2  3  4  5  6  7  Next

Last modified: May 25, 2011