Dennis L. and Sharon E. Hayden - Page 11

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          * * Federal income taxes".  Petitioners do not dispute that the              
          deduction of $9,284 is not allowable.  The deduction is clearly              
          prohibited by statute, and petitioner was aware that Federal                 
          income taxes cannot be deducted.                                             
               "Negligence is a lack of due care or the failure to do what             
          a reasonable and ordinarily prudent person would do under the                
          circumstances."  Freytag v. Commissioner, 89 T.C. 849, 887 (1987)            
          (quoting Marcello v. Commissioner, 380 F.2d 499, 506 (5th Cir.               
          1967), affg. on this issue 43 T.C. 168 (1964) and T.C. Memo.                 
          1964-299, cert. denied 389 U.S. 1004 (1968)), affd. 904 F.2d 1011            
          (5th Cir. 1990), affd. on other grounds 501 U.S. 868 (1991).  The            
          question then is whether petitioner has established that his                 
          conduct meets the reasonable or prudent person standard.  See                
          Rule 142(a); see also Freytag v. Commissioner, 89 T.C. at 887.               
               Petitioner argues that the deduction was the result of a                
          reasonable mistake caused by an employee who erroneously posted              
          the amount of the check(s) to pay Federal income taxes to the                
          "payroll" account.  We may agree that the posting mistake of the             
          employee was understandable, but we have difficulty with                     
          petitioner's explanation.  Petitioner either prepared or directly            
          supervised the preparation of the 1994 tax return.  He is an                 
          accountant, and a large part of his business related to tax                  
          matters.  The $9,284 in income taxes deducted as "payroll" taxes             
          constitutes approximately 17 percent of the taxable income of the            
          accounting practice.  Moreover, it represents 53 percent of the              
          deduction claimed for "payroll" taxes.  These are not                        

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