Thomas A. Johnson - Page 17

               Failure to keep adequate records is some evidence of                   
          negligence.  Marcello v. Commissioner, supra at 507;  Magnon v.             
          Commissioner, 73 T.C. 980, 1008 (1980).  Petitioner did not                 
          maintain adequate records regarding the funds disbursed to or               
          received from Finnimore.  Petitioner argues that he loaned funds            
          to Finnimore; yet, none of the advances carried the indicia of a            
               Petitioner offered no evidence connecting his nutritional              
          system to computer software or any other research or experiment.            
          Petitioner deducted items for the business use of his home, but             
          he failed to produce evidence supporting the deductions.                    
               We conclude that the underpayments for the taxable years               
          1988 and 1989 are attributable to negligence.                               
          Addition to Tax Under Section 6661                                          
               Respondent determined that petitioner is liable for an                 
          addition to tax under section 6661 for the taxable year 1988.               
          Section 6661(a) provides for an addition to tax equal to 25                 
          percent of the amount of any underpayment attributable to a                 
          substantial understatement of income tax.  Pallottini v.                    
          Commissioner, 90 T.C. 498, 501 (1988).  An understatement is                
          substantial if it exceeds the greater of $5,000 or 10 percent of            
          the tax required to be shown on the return.  Sec. 6661(b).  The             
          amount of the understatement may be reduced under section                   
          6661(b)(2)(B) for amounts adequately disclosed or supported by              
          substantial authority.  Respondent's determination of the                   

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