Malcolm I. Lewin and Trina Lewin - Page 20

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          also found that other recyclers were commercially available                 
          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                





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