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the purchase of the equipment on which depreciation is claimed or
the lease of different equipment.
Respondent concedes that petitioners paid $3,000 to their
bankruptcy attorney but contends that the amount is a personal
expense because the purpose of the proceeding was to prevent
foreclosure on petitioners’ homestead. Petitioners have given us
no basis for concluding that the bankruptcy attorney’s fee was an
ordinary and necessary business expense or for allocating the fee
between personal services and business services. See United
States v. Collins, 26 F.3d 116 (11th Cir. 1994); Dowd v.
Commissioner, 68 T.C. 294, 303-304 (1977).
With respect to the penalties for negligence, the parties
stipulated that the interest deducted on petitioners’ returns for
the years in issue exceeded substantially the amounts that they
were entitled to deduct. Although Mr. Mitchell asserted that he
relied on Forms 1098 received from banks, his testimony is
uncorroborated and not persuasive. As a certified public
accountant, he should have maintained accurate records of his
interest payments and deducted only the amounts actually paid.
Petitioners have failed to prove that the recomputed
underpayments are not due to negligence, and recomputed penalties
under section 6662(a) will be sustained.
To take account of the concessions by the parties,
Decision will be entered
under Rule 155.
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Last modified: May 25, 2011