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debt arising out of a trade or business activity when the debt
was clearly related to property held for the production of
income.
At trial, petitioner contended he was not negligent or in
disregard of rules or regulations for 1990 in claiming he was
engaged in a trade or business activity because he relied on a
position that was taken by the Internal Revenue Service (IRS) in
the audit of his 1983 tax return. For 1983, petitioner had
reported a trade or business activity based on a Schedule C filed
with his return, and the IRS did not challenge that his activity
was a trade or business. Petitioner did not submit to the Court
a copy of his 1983 return or the IRS audit report for his 1983
tax year but submitted a "Statement of Change To Your Account",
dated April 7, 1986, which he received from the IRS that
indicated an increase in tax for 1983 in the amount of $399 and
interest charged of $96.23, for a total amount of $455.23, which
the statement acknowledged as having been paid. Petitioner's
claim of reliance for purposes of the negligence penalty is not
substantiated. The record of this case indicates that the
principal nature of petitioner's trade or business during 1983
may well have been the commodity trading strategy and manual that
petitioner was promoting at that time. Petitioner acquired the
Bridgewater, New Jersey, property sometime during 1983 and first
sought a variance to build a three-family house on the property
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