- 17 - care in the preparation of a tax return; disregard includes any careless, reckless, or intentional disregard of rules or regulations. Sec. 6662(c); see also Hansen v. Commissioner, 471 F.3d 1021, 1028 (9th Cir. 2006), affg. T.C. Memo. 2004-269. Negligence has also been defined as the lack of due care or failure to do what a reasonable and ordinarily prudent person would do under similar circumstances. Allen v. Commissioner, 925 F.2d 348, 353 (9th Cir. 1991), affg. 92 T.C. 1 (1989). Negligence includes any failure by the taxpayer to keep adequate books and records or to substantiate items properly, sec. 1.6662-3(b)(1), Income Tax Regs., and negligence is strongly indicated where the 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 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), and courts generally look both to the reasonableness of 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 obviouslyPage: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: November 10, 2007