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and not attributable to fraud. Section 6662(a) and (b)(1), as
applicable for 1990, imposes a penalty of 20 percent on the
portion of an underpayment of tax required to be shown on a
return which is attributable to negligence or disregard of rules
or regulations.
Negligence is the lack of due care or failure to do what a
reasonable and ordinarily prudent person would do under the
circumstances. See Neely v. Commissioner, 85 T.C. 934, 947
(1985). The negligence addition to tax and the negligence
penalty will apply if, among other things, the taxpayer fails to
maintain adequate books and records with regard to the items in
question. See Crocker v. Commissioner, 92 T.C. 899, 917 (1989).
Petitioner claimed Schedule F and Schedule C loss deductions with
respect to activities which he could not establish he engaged in
for profit. He also failed to produce records substantiating the
expenses which allegedly produced the losses. Because of
petitioner’s failure to maintain such records, we conclude that
petitioner is liable for the negligence additions to tax and
negligence penalty relating to the above items.
I. Petitioner’s Legal Arguments
Statute of Limitations
The notice of deficiency that relates to petitioner’s 1988,
1989, and 1990 tax years was issued on February 7, 1997. The
notice of deficiency that relates to petitioner’s 1987 tax year
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