Tom I. Lincir and Diane C. Lincir - Page 8




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                                       OPINION                                        
          1.  Additions to Tax Under Sections 6653(a) and 6653(a)(1) and (2)          
               Section 6653(a) (and, beginning with taxable year 1981,                
          section 6653(a)(1)) provides for an addition to tax equal to 5              
          percent of any underpayment if any part of the underpayment is              
          due to negligence or intentional disregard of rules and                     
          regulations.  Section 6653(a)(2) (beginning with the tax year               
          1981) provides for an addition to tax equal to 50 percent of the            
          interest payable on the deficiency with respect to the portion of           
          the underpayment which is attributable to negligence or                     
          intentional disregard of rules and regulations.                             
               Negligence under sections 6653(a) and 6653(a)(1) and (2) is            
          the lack of due care or the failure to act as a reasonable person           
          would act under the same circumstances where there is a legal               
          duty to act.  See Neely v. Commissioner, 85 T.C. 934, 947 (1985).           
          Petitioners bear the burden of proving that no part of the                  
          underpayments for the years at issue is due to negligence or                
          intentional disregard of rules and regulations.  See Rule 142(a);           
          Bixby v. Commissioner, 58 T.C. 757 (1972).                                  
              In this case, the high writeoffs generated by the FTI/Merit            
          programs were reflected as consistent annual losses of hundreds             
          of thousands of dollars.  The losses approached, and often                  
          exceeded, petitioners' income from their two businesses.  Write-            
          offs of this magnitude should have alerted petitioners that their           
          deductions were, at best, questionable.  See Collins v.                     

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