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settlement of the penalties for negligence, instead of fraud,
indicate that respondent was not substantially justified. We
disagree. The fact that the Commissioner eventually loses or
concedes a case does not establish that a taxpayer is entitled to
an award of reasonable litigation and administrative costs.
Wilfong v. United States, 991 F.2d 359, 364 (7th Cir. 1993);
Hanson v. Commissioner, 975 F.2d 1150, 1153 (5th Cir. 1992);
Sokol v. Commissioner, 92 T.C. 760, 767 (1989). However, it is a
factor to be considered. Estate of Perry v. Commissioner, 931
F.2d 1044, 1046 (5th Cir. 1991); California Marine Cleaning, Inc.
v. Commissioner, T.C. Memo. 1998-311.
In their motions, petitioners and PCCL claimed that
respondent had access to all records throughout the course of the
investigation. It is well settled that a taxpayer is required to
keep permanent books of account and records to substantiate the
income and expenses reported on his income tax return. Sec.
6001; sec. 1.6001-1(a), Income Tax Regs. Generally, when a
taxpayer does not produce substantiation of claimed deductions,
disallowance is proper. Amann v. Commissioner, T.C. Memo. 1993-
542, affd. 40 F.3d 1235 (1st Cir. 1994); see Roberts v.
Commissioner, 62 T.C. 834, 836-837 (1974); Schnelten v.
Commissioner, T.C. Memo. 1993-264.
There is nothing in the record that suggests petitioners'
and PCCL's records and books were available to respondent. It
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