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trial briefs. Accordingly, respondent’s determination that
Olympic understated its income by $56,598 is sustained.
III. Section 6662(a)
Respondent determined accuracy-related penalties under
section 6662(a). That section imposes a penalty in the amount of
20 percent of any portion of the underpayment attributable to
negligence or disregard of rules or regulations. Negligence is
the lack of due care or the failure to do what a reasonable and
ordinarily prudent person would do under the circumstances. See
Neely v. Commissioner, 85 T.C. 934, 947 (1985). The negligence
penalty will apply if, among other things, the taxpayer fails to
maintain adequate books and records with regard to the items in
question. See Crocker v. Commissioner, 92 T.C. 899, 917 (1989).
Respondent determined that petitioners are liable for the
penalties on the understatements. Petitioners failed to address
the accuracy-related penalties in their briefs and presented no
evidence at trial as to why the resulting understatements or
deficiencies were reasonable. Petitioners did state that “many
records were either lost or destroyed and/or not available which
very likely would have substantiated further losses, not income,
from the failed Olympic Concrete Pumping Company” but did not
provide any explanation for the lost or destroyed records.
Petitioners’ 1991 returns show their awareness that losses
claimed from S corporations are limited to basis. In 1992,
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