Alton M. Towles, Jr. - Page 10




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          Respondent also determined that they are liable for each of the             
          years at issue for the accuracy-related penalty under section               
          6662(a) on the underpayment for each of those years that is                 
          attributable to, inter alia, that claimed Schedule A deduction              
          and that claimed rental loss.                                               
                                       OPINION                                        
               Petitioners bear the burden of proof on the issues pre-                
          sented.  Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115                 
          (1933).  Petitioners attempted to satisfy their burden of proof             
          through the testimony of Mr. Towles and certain documentary                 
          evidence.  Based on our observation of Mr. Towles' demeanor, we             
          did not find him credible.  Moreover, Mr. Towles' testimony was             
          contradicted by the testimony of Mr. Alexander and Ms. Nichols,             
          two of respondent's witnesses, and certain documentary evidence.            
          We found each of those two witnesses to be credible and their               
          testimony to be consistent.3  We also found Mr. Schultz, respon-            
          dent's remaining witness, to be credible.                                   
               Petitioners contend that they are entitled to deduct under             
          section 212 the expenditures that the parties stipulated they               




               3On Mar. 8, 1999, petitioners filed a motion to strike the             
          testimony of Mr. Alexander on the ground that he perjured himself           
          at the trial in this case.  We shall deny that motion.  Even if             
          we were to exclude the testimony of Mr. Alexander, our findings             
          and conclusions herein would not change.                                    





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