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misunderstanding of fact or law that is reasonable in light of
the experience, knowledge and education of the taxpayer." In
these circumstances, we believe that petitioner's use of a per
diem method to calculate his lodging expenses was an "honest
misunderstanding" constituting reasonable cause under section
6664(c)(1). Thus, the underpayments arising from the disallowed
travel expenses are not subject to accuracy-related penalties
under section 6662(b)(1) or (2).
Employee Benefit Program
Petitioner has conceded that he is not entitled to a $1,086
deduction claimed on Schedule C of his 1990 return for employee
benefit programs. Respondent contends that the amount represents
petitioner's medical expenses that were not deductible on
Schedule A because they did not exceed 7.5 percent of adjusted
gross income, see sec. 213(a), and asserts that a section
6662(b)(1) penalty is appropriate because the deduction had no
basis in law or fact. Petitioner offered no explanation or
argument with respect to the deduction or the penalty. On this
record, we find that the underpayment arising from this
disallowed deduction is subject to the accuracy-related penalty
under section 6662(b)(1).
1990 Interest Expense
On Schedule C of his 1990 return, petitioner claimed
interest expenses of $10,603 for "Mortgage" and $10,210 for
"Other". With respect to the first amount, petitioner now
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