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negligence. To avoid this penalty, petitioner must show that his
actions were reasonable and not careless, reckless, or made with
intentional disregard of rules or regulations. See Delaney v.
Commissioner, 743 F.2d 670 (9th Cir. 1984), affg. T.C. Memo.
1982-666.
Respondent determined that petitioner was liable for the
penalty on the entire underpayment in each of the 3 years under
consideration. Accordingly, we must consider each adjustment to
decide whether the portion of the underpayment attributable to it
is due to negligence. We recognize that petitioner had no
particular business or tax expertise and became involved in the
bingo operation merely as a front for others. He relied on
advisers (accountants and lawyers) for establishing business
entities and for the preparation of his and his S corporation’s
returns. On the seminal return (the one in which the S
corporation claimed the loss) the deductions were taken in accord
with petitioner’s advisers’ judgment. Petitioner was successful
with respect to two significant items in this litigation--the
legal fee and the $5,500 monthly payments. He was unsuccessful
on the amortization and substantiation issues.
With respect to the amortization issue, that involved a
technical interpretation of regulations, and petitioner’s tax
return preparer and adviser counseled petitioner to amortize the
property based on a 10-year life. Considering petitioner’s
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