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sufficiently investigated the investment, and otherwise acted
reasonably regarding their reporting positions.
For purposes of section 6653, negligence is defined as “lack
of due care or failure to do what a reasonable and ordinarily
prudent person would do under the circumstances.” Neely v.
Commissioner, 85 T.C. 934, 947 (1985) (quoting Marcello v.
Commissioner, 380 F.2d 499, 506 (5th Cir. 1967), affg. in part
and remanding in part 43 T.C. 168 (1964)); see Allen v.
Commissioner, 925 F.2d 348, 353 (9th Cir. 1991), affg. 92 T.C. 1
(1989); Zmuda v. Commissioner, 731 F.2d 1417, 1422 (9th Cir.
1984), affg. 79 T.C. 714 (1982). Negligence is determined by
testing a taxpayer’s conduct against that of a reasonable,
prudent person. Zmuda v. Commissioner, supra.
The Commissioner’s decision to impose the negligence penalty
is presumptively correct. Collins v. Commissioner, 857 F.2d
1383, 1386 (9th Cir. 1988), affg. Dister v. Commissioner, T.C.
Memo. 1987-217; Hansen v. Commissioner, 820 F.2d 1464, 1469 (9th
Cir. 1987). Petitioners have the burden of proving that the
respondent’s determination is erroneous and that they did what
reasonably prudent people would have done under the
circumstances. Rule 142(a); Hansen v. Commissioner, supra; Hall
v. Commissioner, 729 F.2d 632, 635 (9th Cir. 1984), affg. T.C.
Memo. 1982-337; Bixby v. Commissioner, 58 T.C. 757, 791 (1972).
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