Alvin Victor Bracey - Page 10

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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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