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Respondent determined accuracy-related penalties for
negligence under section 6662(a) in the amounts of $2,457 and
$2,450 for 1989 and 1990, respectively. These penalties arose
from disallowed deductions. Respondent asserted by amended
pleadings an additional $15,182 to the accuracy-related penalty
for 1990. Respondent based this additional penalty on unreported
income from 1990. While petitioner bears the burden of proof as
to the penalties as determined by respondent in the deficiency
notice, respondent bears the burden of proof under Rule 142(a)
for the additional penalty.
Negligence, for the purpose of section 6662(a), includes any
failure to make a reasonable attempt to comply with the
provisions of the Internal Revenue Code. Sec. 6662(c).
Petitioner destroyed books and records needed to prove its net
operating losses, failed to maintain records necessary to
substantiate its deductions, and mixed up the nondeductible
mileage of one car with the deductible mileage of another.
Petitioner is liable for negligence to the extent that the
deductions that we have denied result in an underpayment for each
of the years in issue.
With respect to the additional penalty for 1990, however,
respondent has failed to prove negligence. Petitioner's
subsidiary, Far Western, an accrual basis taxpayer, performed
services for its client, IML, sometime in the mid-1980s. The
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