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taxpayer’s actions in connection with the transactions. See
Henry Schwartz Corp. v. Commissioner, 60 T.C. 728, 740 (1973);
see also Turner v. Commissioner, T.C. Memo. 1995-363 (“When
considering the negligence addition, we evaluate the particular
facts of each case, judging the relative sophistication of the
taxpayers as well as the manner in which the taxpayers approached
their investment.”). The determination of negligence is highly
factual. See Merino v. Commissioner, 196 F.3d at 151, 154.
Respondent determined that petitioners are liable for
negligence under section 6653(a)(1) and (2) with respect to the
underpayment of tax attributable to petitioners’ investment in
SAB Foam. Respondent’s determination of negligence is presumed
correct, and petitioners have the burden of proving that they
were not negligent. See Rule 142(a); Welch v. Helvering, 290
U.S. 111, 115 (1933); see also Addington v. Commissioner, supra;
Merino v. Commissioner, 196 F.3d 147 (3d Cir. 1999); Goldman v.
Commissioner, 39 F.3d 402, 407 (2d Cir. 1994), affg. T.C. Memo.
1993-480; Luman v. Commissioner, 79 T.C. 846, 860-861 (1982);
Bixby v. Commissioner, 58 T.C. 757, 791-792 (1972).6
6 Cf. sec. 7491(c), which places the burden of production
on the Commissioner with respect to a taxpayer’s liability for
penalties and additions to tax. Sec. 7491(c) is effective for
court proceedings arising in connection with examinations
commencing after July 22, 1998. Petitioners do not contend, nor
is there evidence, that their examination commenced after July
22, 1998, or that sec. 7491(c) is applicable in this case.
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