- 7 -
otherwise. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933); cf. sec. 7491(c).7 Respondent determined that
petitioners’ underpayments were due to negligence. Petitioners,
therefore, have the burden of proving they were not negligent in
deducting their share of the partnership’s losses. Estate of
Mason v. Commissioner, 64 T.C. 651, 663 (1975), affd. 566 F.2d 2
(6th Cir. 1977); Bixby v. Commissioner, 58 T.C. 757, 791 (1972);
Anderson v. Commissioner, T.C. Memo. 1993-607, affd. 62 F.3d 1266
(10th Cir. 1995).
Negligence is defined as the failure to exercise the due
care that a reasonable and ordinarily prudent person would
exercise under like circumstances. Anderson v. Commissioner,
62 F.3d 1266, 1271 (10th Cir. 1995), affg. T.C. Memo. 1993-607;
Neely v. Commissioner, 85 T.C. 934, 947 (1985); Glassley v.
Commissioner, T.C. Memo. 1996-206. The focus of inquiry is
on the reasonableness of the taxpayer’s actions in light of his
experience and the nature of the investment. Henry Schwartz
Corp. v. Commissioner, 60 T.C. 728, 740 (1973); Greene v.
7 The Internal Revenue Service Restructuring & Reform Act
of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 726, added
sec. 7491(c), which places the burden of production on the
Secretary with respect to a taxpayer’s liability for penalties
and additions to tax in court proceedings arising in connection
with examinations commencing after July 22, 1998. Petitioners do
not contend, nor is there evidence, that their examination
commenced after July 22, 1998, or that sec. 7491 is applicable in
this case.
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