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B. Section 6653(a)(1) and (2) Negligence
Respondent determined that petitioners were liable for
additions to tax for negligence under section 6653(a)(1) and (2)
with respect to underpayments attributable to petitioners’
investment in Whitman. Petitioners contend that they were not
negligent because: (1) They lacked investment experience and
sophistication, and (2) they reasonably relied upon their C.P.A.
Section 6653(a) for 1979, and section 6653(a)(1) for 1982
and 1984, provide for an addition to tax equal to 5 percent of
the underpayment if any part of an underpayment of tax is due to
negligence or intentional disregard of rules or regulations.
Section 6653(a)(2) for 1982 and 1984 provides for an addition to
tax equal to 50 percent of the interest payable with respect to
the portion of the underpayment attributable 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. Neely v. Commissioner, 85 T.C.
934, 947-948 (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).
The determination of negligence is highly factual. When
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