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losses3 even though he had no credible plan to make a profit from
the farm during or after the years in issue. Petitioners did not
act in good faith in claiming Schedule F farming losses, and
their underpayments were not due to reasonable cause.
Petitioners were negligent in deducting expenses and the loss on
the sale of 502 North Hickory because they did not convert it to
rental property.
Petitioners are liable for the accuracy-related penalty
because they substantially understated their tax for 1995, 1996,
and 1997, and they did not have substantial authority for their
positions regarding the farm losses and the residence conversion.
We conclude that petitioners are liable for accuracy-related
penalties under section 6662(a) for 1995, 1996, and 1997.
To reflect the foregoing,
Decision will be entered
for respondent.
3 We previously decided by Summary Opinion that petitioner
did not operate the farm for profit in 1992 or 1993. Mitchell v.
Commissioner (filed Oct. 8, 1998). We do not consider
petitioners’ prior case in deciding whether petitioners were
negligent because it is not clear that the decision in their
earlier case was filed before they filed their 1997 return.
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