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In Krause v. Commissioner, supra, we held for the taxpayers
on the issue of negligence. We did so in the context of oil
recovery technology based on special or unusual circumstances
related to the energy and oil crisis of the late 1970s and early
1980s:
In evaluating the imposition of the additions to tax
in this case, and in light of the above facts
(encouraging investments in and the development of
tertiary oil recovery methods such as [enhanced oil
recovery] technology), we are somewhat understanding of
the individual investments that were made in * * *
Partnerships. In the context of the hysteria relating
to the energy crisis, the oil price increases of the
late 1970s, the industry and the governmental interest
in [enhanced oil recovery] technology, the heavy and
sophisticated promotion of these investments * * * we
conclude that petitioners are not liable for the
additions to tax and the additional interest element
for negligence under sections 6653(a), 6653(a)(1) and
(2). [Id. at 178.]
None of the circumstances that were determinative in Krause
v. Commissioner, supra, are present in the case at bar.
Petitioner’s reliance on the cited case is misplaced.
In view of the foregoing, we hold that petitioner is liable
for the additions to tax under section 6653(a)(1) and (2) for
negligence. Respondent’s determination is sustained.
II. Section 6661(a) Substantial Understatement of Tax Liability
The second issue for decision is whether petitioner is
liable for an addition to tax under section 6661(a). That
section, as amended by the Omnibus Budget Reconciliation Act of
1986, Pub. L. 99-509, sec. 8002, 100 Stat. 1951, provides for an
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