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during the years in issue. See id. In reaching the conclusion
that the transaction lacked a business purpose, this Court relied
heavily upon the overvaluation of the recyclers. Similarly, in
Gottsegen v. Commissioner, T.C. Memo. 1997-314, we found that
each EPS recycler had a fair market value of not more than
$50,000 and relied heavily on the overvaluation of the recyclers
in concluding that the taxpayer was negligent and liable for
accuracy-related penalties. See Addington v. Commissioner,
supra.
Issue 1. Section 6653(a)(1) and (2) Additions to Tax for
Negligence
Section 6653(a)(1) provides for an addition to tax equal to
5 percent of the underpayment if any part of the underpayment of
tax is due to negligence or intentional disregard of rules or
regulations. Section 6653(a)(2) provides for an addition to tax
equal to 50 percent of the interest payable with respect to the
portion of the underpayment attributable to negligence or
intentional disregard of rules or regulations.
Negligence is defined as the failure to exercise the due
care that a reasonable and ordinarily prudent person would
exercise under the circumstances. See Neely v. Commissioner, 85
T.C. 934, 947-948 (1985). The pertinent question is whether a
particular taxpayer’s actions are reasonable in light of the
taxpayer’s experience, the nature of the investment, and the
taxpayer’s actions in connection with the transactions. See
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