Patrick E. Catalano - Page 17

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          “disregard” includes any careless, reckless, or intentional                 
          disregard.  Sec. 6662(c).                                                   
               Petitioner bears the burden of proving that respondent's               
          determination as to the accuracy-related penalties is in error.             
          Rule 142(a).  Petitioner argues that respondent has waived the              
          penalties by not addressing them at trial.  Petitioner is                   
          mistaken.  The issue of the penalties arose in the pleadings, and           
          petitioner retained the burden of proving the penalties                     
          inapplicable, regardless of whether the issue was addressed at              
          trial.  See Bixby v. Commissioner, 58 T.C. 757, 791 (1972).                 
               In this case, petitioner, an attorney, repeatedly caused his           
          wholly owned S corporation to deduct expenses relating to                   
          entertainment facilities without regard to the explicit                     
          prohibition of such deductions in the Internal Revenue Code.                
          Petitioner’s attempt to treat the rent for two Donzi powerboats             
          and a cabin cruiser as business expenses of his law practice                
          strikes us as the kind of abuse that Congress sought to curb in             
          enacting the absolute prohibition on entertainment facilities               
          deductions contained in section 274(a)(1)(B).                               
               Petitioner urges that he conferred with his accountant                 
          concerning the boat leasing activities.  We are not persuaded               
          that this action suffices to avoid the negligence penalties.                
          Reliance upon disinterested expert advice may satisfy the prudent           
          person standard, but only when the taxpayer has shown that he               

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Last modified: May 25, 2011