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petitioners’ underpayment was due to negligence. Petitioners,
therefore, have the burden of proving they were not negligent in
deducting their share of the partnership’s losses. See Estate of
Mason v. Commissioner, 64 T.C. 651, 663 (1975), affd. 566 F.2d 2
(6th Cir. 1977); Bixby v. Commissioner, 58 T.C. 757, 791 (1972);
Anderson v. Commissioner, T.C. Memo. 1993-607, affd. 62 F.3d 1266
(10th Cir. 1995).
Negligence is defined as the failure to exercise the due
care that a reasonable and ordinarily prudent person would
exercise under like circumstances. See Anderson v. Commissioner,
62 F.3d 1266, 1271 (10th Cir. 1995), affg. T.C. Memo. 1993-607;
Neely v. Commissioner, 85 T.C. 934, 947 (1985); Glassley v.
Commissioner, T.C. Memo. 1996-206. The focus of our inquiry is
on the reasonableness of the taxpayer’s actions in light of his
experience and the nature of the investment. See Henry Schwartz
Corp. v. Commissioner, 60 T.C. 728, 740 (1973); Greene v.
Commissioner, T.C. Memo. 1998-101, affd. without published
opinion 187 F.3d 629 (4th Cir. 1999); Glassley v. Commissioner,
supra; Turner v. Commissioner, T.C. Memo. 1995-363. Whether a
taxpayer is negligent in claiming a tax deduction “depends upon
both the legitimacy of the underlying investment, and due care in
the claiming of the deduction.” Sacks v. Commissioner, 82 F.3d
2(...continued)
contend that their examination commenced after July 22, 1998, or
that sec. 7491 is applicable to them.
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