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unsubstantiated interest payments and business expenses and
failing to report as income moneys received from LIC and L&L.
Petitioner was ordered before trial to produce documents
relevant to the issues in dispute. He did not comply. He was
also allowed to reopen the record subsequent to the trial.
Petitioners failed to produce documents that would substantiate
their claims. They failed to file the post-trial brief ordered
by the Court, so their final explanation and arguments are
unknown.
Petitioners have failed to show reasonable cause for
claiming the disallowed deductions or failing to report the
income received by them, particularly the compensation received
from L&L, or that they acted in good faith. Respondent’s
determination that petitioners are liable for the section
6653(a)(1) addition to tax for 1988 and the section 6662(a)
penalty for 1989 will be sustained.
Section 6661
Respondent determined that petitioners are liable for the
section 6661 addition to tax for 1988. Petitioners bear the
burden of proving that respondent’s determination is erroneous.
Rule 142(a); Cluck v. Commissioner, 105 T.C. 324, 339 (1995).
Section 6661(a) provides for an addition to tax on underpayments
attributable to a substantial understatement of income tax.
Section 6661(b)(2)(A) defines the term “understatement” as being
the excess of the amount of tax required to be shown on the
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Last modified: May 25, 2011