Malcolm I. Lewin and Trina Lewin - Page 21

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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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