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Consequently, we are unable to conclude that these deposits were
made from nontaxable sources. Respondent’s determination that
petitioner’s 1995 income was understated by the total of these
deposits is therefore sustained.
2. Self-Employment Tax
We accept petitioner’s claim that with the exception of
Submarine 21, he was not otherwise employed, or self-employed
during 1995. To the extent that Submarine 21 was the source of
the omitted income as determined above, that income would not
constitute net earnings from self-employment, see sec. 1402, and
therefore would not be subject to the section 1401 tax imposed on
such income. Consequently, we reject respondent’s determination
that the omitted income is subject to the section 1401 tax.
3. Negligence Penalty
Respondent determined that the understatement of tax
required to be shown on petitioner’s 1995 return is due to
negligence. Section 6662(a) imposes an accuracy-related penalty
of 20 percent on any portion of an underpayment of tax that is
attributable to negligence or disregard of rules or regulations.
Section 6662(a) defines “negligence” to include any failure to
make a reasonable attempt to comply with the Internal Revenue
Code, and defines “disregard” to include any careless, reckless,
or intentional disregard of rules or regulations. The negligence
penalty does not apply to any portion of an underpayment if it is
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