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certain expenses that were substantiated to respondent's
satisfaction, the Court considers petitioners' claim that they
should not be liable for the section 6662(a) penalty to be
frivolous and groundless. Petitioners knew that a substantial
portion of the itemized deductions at issue was false and could
not be sustained. Petitioners should have had reservations at
the time the return was filed as to the accuracy of the claimed
itemized deductions, particularly when they were never requested
by the return preparer as to the amount of and/or the
documentation to substantiate the amounts reported on the return.
Petitioners knew that they were entitled to deduct only amounts
that they had actually paid. They made no attempt to determine
the qualifications of their return preparer; they did not consult
with tax professionals as to the accuracy of Mr. Beltran's
representations; and, moreover, they cited no legal authority to
the Court that, under similar facts, would exonerate them from
the penalties under section 6662(a).
The function of this Court is to provide a forum to decide
issues relating to liability for Federal taxes. At trial,
petitioners realized that they had no case with respect to the
deficiency but chose to continue to challenge the imposition of
the penalty under section 6662(a). Any reasonable and prudent
person, under the facts presented to the Court, should have known
that the claimed deductions could not have been sustained, and
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Last modified: May 25, 2011