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to 50 percent of the interest payable with respect to the portion
of the underpayment attributable to the negligence or intentional
disregard of rules or regulations.
Negligence is defined as the failure to exercise the due
care that a “reasonable and prudent” person would employ under
the circumstances. Goldman v. Commissioner, supra at 407; Neely
v. Commissioner, 85 T.C. 934, 947 (1985).
In Provizer v. Commissioner, supra, this Court found that
each Sentinel Recycler had a fair market value not in excess of
$50,000 and that the Clearwater Group transaction was a sham
because it lacked economic substance and a business purpose. In
reaching the conclusion that the transaction lacked economic
substance and a business purpose, this Court relied heavily upon
the overvaluation of the Sentinel Recycler. It is stipulated
that the SAB transactions are substantially similar, and
petitioner, therefore, agrees that the same flaws existed with
SAB.
Petitioner essentially contends that the additions to tax
for negligence should not apply because he was not a
sophisticated investor. Petitioner may not be a sophisticated
investor, but, even if a taxpayer is an unsophisticated investor,
that taxpayer is not relieved of the requirement to use ordinary
care and prudence. The pertinent facts here are that petitioner
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Last modified: May 25, 2011