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general, section 167(a) authorizes a depreciation deduction for
the exhaustion, wear and tear of property used in a trade or
business or held for the production of income. Petitioner
testified that he earned approximately $2,000 of income from his
towing operation during each of the years in issue. Although
petitioner did not separately account for this income, we found
petitioner’s testimony to be credible. Moreover, respondent’s
determination in the notice of deficiency requires us to believe
that petitioner, who operated a service station, owned towing
equipment but did not use it in his trade or business or for the
production of income. We find that he did and hold that
petitioner is entitled to the deductions for depreciation that
were disallowed by respondent.
Addition to Tax and Accuracy-Related Penalties
For petitioner’s 1994 tax year, respondent determined an
addition to tax under section 6651(a) in the amount of $2,205.
In general, section 6651(a) applies in the case of failure to
timely file a return, unless it is shown that the failure was due
to reasonable cause and not willful neglect. Petitioner filed
his 1994 tax return more than 4 months after the due date, and
there is no evidence of reasonable cause. Therefore, petitioner
is liable for an addition to tax under section 6651(a) for 1994.
For petitioner’s 1993 and 1994 tax years, respondent
determined accuracy-related penalties under section 6662(a) in
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