Patrick W. Healey and Nancy L. Marshall - Page 17

                                       - 17 -                                         

          why they did not report all of petitioner wife’s income, and they           
          could have easily checked to see when they had received the                 
          $35,000 pension distribution.                                               
               Failure to keep adequate records is evidence of negligence.            
          Marcello v. Commissioner, supra; Magnon v. Commissioner, 73 T.C.            
          980 (1980).  A taxpayer is required to maintain records                     
          sufficient to correctly prepare his or her tax return.  Sec.                
          1.6001-1(a), Income Tax Regs.  Petitioners had insufficient                 
          records to support their claimed deduction of expenses for meals            
          and entertainment, $6,818 in business expense deductions for                
          petitioner wife's activities, and $22,833 in itemized deductions            
          for unreimbursed employee expenses and personal property taxes.             
               Petitioners contend that they were not negligent in                    
          erroneously claiming a dependency exemption for their daughter,             
          Robin, because they did not know how much she earned.                       
          Petitioner apparently assumed without checking that they could              
          claim an exemption for her.  There is no evidence that they tried           
          to find out how much she earned.                                            
               Petitioners’ understatement of income and overstatement of             
          deductions and the inadequacy of their records are sufficient to            
          show that they were negligent.  We conclude that petitioners are            
          liable for the accuracy-related penalty for 1990 under section              
          6662(a).                                                                    







Page:  Previous  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  26  Next

Last modified: May 25, 2011