Don L. and Lora Christensen - Page 6




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          the cost of commencing and engaging in the farming of jojoba by             
          claiming, inaccurately, that capital expenditures in jojoba                 
          plantations might be treated as research or experimental                    
          expenditures for purposes of claiming deductions under section              
          174."  Id.                                                                  
               As a result of Blythe II's TEFRA proceeding, petitioners               
          were assessed tax deficiencies of $20,933 for 1982 and $1,006 for           
          1983, plus interest.  Subsequently, respondent issued a notice of           
          deficiency to petitioners, for 1982 and 1983, for affected items,           
          determining that petitioners are liable for the additions to tax            
          for negligence under section 6653(a)(1) and (2) and a substantial           
          understatement of tax under section 6661 for 1982.  These                   
          additions to tax are the subject of the instant case.                       
               The first issue is whether petitioners are liable for the              
          additions to tax for negligence under section 6653(a)(1) and (2)            
          for both years at issue.  Section 6653(a)(1) imposes an addition            
          to tax in an amount equal to 5 percent of an underpayment of tax            
          if any part of the underpayment is due to negligence or                     
          intentional disregard of rules or regulations.  Section                     
          6653(a)(2) imposes another addition to tax in an amount equal to            
          50 percent of the interest due on the portion of the underpayment           
          attributable to negligence or intentional disregard of rules or             
          regulations.  Respondent’s determinations in a notice of                    
          deficiency are presumed correct, and petitioners must establish             





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