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comply with the provisions of the Internal Revenue Code. Sec.
6662(c). The regulations under section 6662 provide that
negligence is strongly indicated where a taxpayer “fails to make
a reasonable attempt to ascertain the correctness of a deduction,
credit or exclusion on a return which would seem to a reasonable
and prudent person to be ‘too good to be true’ under the
circumstances”. Sec. 1.6662-3(b)(1)(ii), Income Tax Regs.
Negligence is defined as the “‘lack of due care or failure
to do what a reasonable or ordinarily prudent person would do
under the circumstances.’” Neely v. Commissioner, 85 T.C. 934,
947 (1985) (quoting Marcello v. Commissioner, 380 F.2d 499, 506
(5th Cir. 1967), affg. in part and remanding in part on another
ground 43 T.C. 168 (1964)); see Allen v. Commissioner, 925 F.2d
348, 353 (9th Cir. 1991), affg. 92 T.C. 1 (1989). Negligence is
determined by testing a taxpayer’s conduct against that of a
reasonable, prudent person. Zmuda v. Commissioner, 731 F.2d
1417, 1422 (9th Cir. 1984), affg. 79 T.C. 714 (1982). Courts
generally look both to the underlying investment and to the
taxpayer’s position taken on the return in evaluating whether the
taxpayer was negligent. Sacks v. Commissioner, 82 F.3d 918, 920
(9th Cir. 1996), affg. T.C. Memo. 1994-217. When an investment
has such obviously suspect tax claims as to put a reasonable
taxpayer under a duty of inquiry, a good faith investigation of
the underlying viability, financial structure, and economics of
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