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Petitioner has not established that his separation from
employment with Balfour caused him to incur a loss during 1993 on
his New York City sales territory. In fact, a similar claim by
petitioner was rejected by the District Court when it ruled that
petitioner incurred no loss of equity in his sales territory
because he continued to service accounts in that territory after
leaving Balfour. As the court stated:
Hess argues that even though he has taken his accounts
to a Balfour competitor, Balfour must compensate him
for his equity. In reality, what Hess bought in 1971
from Mr. Myers was the right to service accounts in a
specific territory. To now take those accounts from
that territory, yet demand payment from Balfour for the
value of the territory, flies in the face of contract
law, not to mention common sense.
Petitioner also has not proven that he has a basis in the
sales territory. Petitioner "paid" Mr. Myers for this territory
with income that was not previously taxed to petitioner.
Petitioner's "payments" were made through debits to his sales
account, and these debits were not included as taxable income on
the Forms W-2 that Balfour issued to him. Nor does the record
reveal that petitioner otherwise reported these debits as income
on his returns. Because petitioner's "payments" for his sales
territory were not included in his gross income, he lacks a basis
therein which, in turn, precludes him from deducting a loss on
its alleged destruction.
3. Accuracy-Related Penalty
Respondent determined that petitioner is liable for an
accuracy-related penalty for negligence under section 6662(a) for
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