- 21 -
petitioners' position reasonable in light of the weight
of authority against that position. Cf. United States v.
Fitzsimmons, 712 F.2d 1196 (7th Cir. 1983), where a
taxpayer's conviction for willfully and knowingly making
and subscribing tax returns that he did not believe to be
true and correct, in violation of section 7206(1), was
predicated on the fact that the taxpayer, a dentist,
reduced his gross receipts by the value of certain free
services to his patients. Accordingly, the portion of the
penalty attributable to petitioners' deduction of
advertising expenses is sustained.
We find that petitioners are liable also for the
portion of the penalty determined by respondent with
respect to the adjustments conceded by petitioners; i.e.,
the bad debts and rent expense adjustments. The burden
is on petitioners to prove that a penalty does not apply.
Reily v. Commissioner, 53 T.C. 8, 14 (1969). Petitioners
have not met their burden of proof. They conceded the bad
debts and rent expense adjustments prior to the issuance of
the notice of deficiency, and they introduced no evidence
as to those adjustments at trial. We have no basis in the
record of this case to overturn respondent's determination
that petitioners are liable for the penalty under section
6662(a) with respect to the adjustment of petitioners' bad
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011