Harry D. Bledsoe and Annie L. Bledsoe - Page 23

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            petitioners, petitioners failed to produce adequate records from                            
            which to sustain their deductions.  Therefore, to the extent that                           
            the amount petitioners claimed for legal fee deductions was                                 
            excessive and to the extent petitioners conceded some items, we                             
            find that they were negligent.                                                              
            Late Filing                                                                                 
                  Respondent determined that petitioners are liable for an                              
            addition to tax for filing their 1988 return past its due date.                             
            The addition to tax applies unless it is shown that the failure                             
            to timely file is due to reasonable cause and not due to willful                            
            neglect.  Sec. 6651(a)(1).  Because petitioners have not shown                              
            that they had reasonable cause or that their failure to timely                              
            file was not due to willful neglect, we find that they are liable                           
            for the addition to tax for failing to timely file their 1988 tax                           
            Substantial Understatement                                                                  
                  Respondent determined that petitioners are liable for                                 
            additions to tax for substantially understating their income tax.                           
            Income tax is substantially understated if, in any year, the                                
            amount of the understatement exceeds the greater of 10 percent of                           
            the tax required to be shown on the return or $5,000.  Secs. 6661                           
            and 6662.                                                                                   

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