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that they acted reasonably and exercised due care in preparing
their 1994, 1995, and 1996 tax returns. See sec. 6664(c)(1).
Petitioners concede that B&W should not have deducted as
office expenses in fiscal years 1995 and 1996 the cost of buying
PTC Bancorp stock, that the Badells should have included in
income for 1994, 1995, and 1996 Badell’s fringe benefit income
from B&W in the form of personal use of corporate-owned
automobiles and health and life insurance for which B&W paid the
premiums, and that the Wilsons should have included in income
Wilson’s fringe benefit income from B&W in the form of personal
use of corporate-owned automobiles and life insurance for which
B&W paid the premiums. They contend that they should not be held
liable for negligence because they readily conceded these errors.
We disagree. Petitioners provided no evidence as to the
reasonableness of their position regarding these items. They did
not explain how they decided to treat these items on their
returns or claim that they investigated the proper treatment of
or had authority for their treatment of these items. The fact
that they conceded their errors does not show they were not
negligent. See McCullen v. Commissioner, T.C. Memo. 1997-280.
Petitioners argue that B&W’s tax treatment of advanced
client costs was not negligent because B&W has used the same
method of accounting for costs since B&W was formed and
respondent had not previously challenged it. Finally,
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