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least three knowledgeable people, two of whom were C.P.A.'s and one of whom
was a former Internal Revenue Service (IRS) agent. Petitioner claims that
each of these individuals told him to lie about certain aspects of his return.
For instance, at trial he claimed, contrary to the stipulation of settled
issues, that the funds he expended in gambling were not receipts from his
business but an inheritance from his father. This was the first time
petitioner had raised this claim, and we held him to his stipulation, which he
had agreed to while represented by a C.P.A. and with full knowledge and
acquiescence. Rule 91(e) provides:
A stipulation shall be treated, to the extent
of its terms, as a conclusive admission by the parties to the
stipulation * * *. The Court will not permit a party to a
stipulation to qualify, change, or contradict a stipulation in
whole or in part, except that it may do so where justice requires.
* * *
To allow petitioner at this late date to contradict his stipulation, without
any warning or advance notice to respondent or to the Court, would be highly
prejudicial to respondent, and we exercise our discretion to hold petitioner
to his stipulation.
Petitioner also claimed that he questioned his return preparer about
showing a loss from his Schedule C business, because he knew at the time he
filed his petition that the business had made money. However, he signed the
return as it was because, according to him, the preparer told him the IRS
would not audit the return.
Section 6662(a) imposes a 20-percent addition on the amount of
underpayment due to negligence or disregard of rules and regulations.
"Negligence" includes any failure to make a reasonable attempt to comply with
the provisions of the internal revenue laws or to exercise ordinary and
reasonable care in the preparation of a tax return. Sec. 1.6662-3(b), Income
Tax Regs. Negligence also includes any failure by the taxpayer to keep
adequate books and records or to substantiate items properly. Marcello v.
Commissioner, 380 F.2d 499 (5th Cir. 1967), affg. in part and remanding in
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Last modified: May 25, 2011