- 28 -
79 T.C. 846, 860-861 (1982); Bixby v. Commissioner, 58 T.C. 757,
791-792 (1972); see Rule 142(a); INDOPCO, Inc. v. Commissioner,
503 U.S. 79, 84 (1992); Welch v. Helvering, 290 U.S. 111, 115
(1933).13
Section 6653(a)(1) and (2) imposes additions to tax if any
part of the underpayment of tax is due to negligence or
intentional disregard of rules or regulations. Negligence is
defined as the failure to exercise the due care that a reasonable
and ordinarily prudent person would exercise under the
circumstances. See Neely v. Commissioner, 85 T.C. 934, 947
(1985). The pertinent question is whether a particular
taxpayer's actions are reasonable in light of the taxpayer's
experience, the nature of the investment, and the taxpayer's
actions in connection with the transactions. See Henry Schwartz
Corp. v. Commissioner, 60 T.C. 728, 740 (1973). In this regard,
the determination of negligence is highly factual. "When
considering the negligence addition, we evaluate the particular
facts of each case, judging the relative sophistication of the
taxpayers as well as the manner in which the taxpayers approached
their investment." Turner v. Commissioner, T.C. Memo. 1995-363.
Under some circumstances, a taxpayer may avoid liability for
13 Cf. sec. 7491(c), effective for court proceedings
arising in connection with examinations commencing after July 22,
1998. In the present cases, the examination of petitioners’
income tax returns for 1982 through 1985 commenced well before
July 22, 1998.
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