William R. and Betty O. Bass - Page 8
- 8 -
In Lopez v. Commissioner, supra, as in this case, the
partnership in which the taxpayers invested had signed a
Stipulation to be Bound by the outcome of Utah Jojoba I Research.
Petitioners have not shown any facts that would distinguish this
case from the others involving jojoba plant ventures.
Section 6653(a)(1) imposes an addition to tax in an amount
equal to 5 percent of the underpayment of tax if any part of the
underpayment is due to negligence or intentional disregard of
rules or regulations. Section 6653(a)(2) imposes another
addition to tax in an amount equal to 50 percent of the interest
due on 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 like circumstances. See Anderson v. Commissioner,
62 F.3d 1266, 1271 (10th Cir. 1995), affg. T.C. Memo. 1993-607;
Neely v. Commissioner, 85 T.C. 934, 947 (1985). The focus of
inquiry is the reasonableness of the taxpayer’s actions in light
of the taxpayer’s experience and the nature of the investment.
See Henry Schwartz Corp. v. Commissioner, 60 T.C. 728, 740
(1973); see also Sacks v. Commissioner, 82 F.3d 918, 920 (9th
Cir. 1996) (whether a taxpayer is negligent in claiming a tax
deduction “depends upon both the legitimacy of the underlying
investment, and due care in the claiming of the deduction.”),
Page: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Last modified: March 27, 2008