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customers. Petitioner stored this material until 1993, when it
abandoned hope of reviving the two subsidiaries.
The additional penalty asserted by respondent revolves
around services performed by Far Western for International
Marketing Limited (IML) sometime in the mid-1980s. On December
28, 1989, after petitioner had liquidated Far Western, petitioner
sent IML a bill for $57,100. As payment IML gave petitioner a
parcel of land, known as Lot 51. To offset the value of Lot 51,
petitioner issued IML a note for $38,000.
Although petitioner and its subsidiaries were accrual method
taxpayers, they failed to include in income the amount due for
services performed for IML. Petitioner concedes that Lot 51 had
a fair market value of $150,000, and concedes $112,000 of
services income for 1990.
OPINION
Respondent's primary contention is that there was no
business purpose for petitioner's deductions. Respondent claims
that petitioner deducted personal expenses of the Byrnes.
Respondent also asserts lack of substantiation in many instances.
Because respondent contends that petitioner deducted personal
expenses, failed to report services income, and failed to
maintain adequate records, she also asserts negligence.
Petitioner replies that it deducted only business expenses
that are substantiated by petitioner's books and in some cases by
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