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determinations in the notices of deficiency are presumed correct,
and petitioners must establish otherwise. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933); cf. sec. 7491(c).6
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
6 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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