Dan S. and Nancy J. Mitchell - Page 8

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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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