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In respondent’s posttrial opening brief, respondent
“accepts” petitioners’ computation of a 48-percent use of the
home for the day care business and states: “The Court should
allow [Mrs. Willits] deductions for expenses pursuant to the
Cohan rule.”
In respondent’s posttrial reply brief, respondent states:
Notwithstanding the foregoing, however, respondent
would suggest that petitioners be allowed a deduction for
expenses for the day care business (including business use
of the home) in the total amount of $10,000. That amount
consists of $7,385 in total expenses, plus $2,615 for
business use of their home. Respondent bases these figures
on the deductions claimed on [Mrs. Willits’] Schedule C
attached to petitioners’ 1992 return.
We believe respondent has therefore conceded that petitioners are
entitled to business expense deductions of $10,000 for 1993, and
we so hold. Furthermore, after careful consideration of the
record, we hold that petitioners have not established that they
are entitled to any deduction in excess of what respondent
generously conceded.
Accuracy-Related Penalty
The final issue is whether petitioners are liable for the
accuracy-related penalty under section 6662(a) for negligence or
intentional disregard of rules or regulations for the 1992 tax
year. Section 6662(a) provides that, if it is applicable to any
portion of an underpayment in taxes, there shall be added to the
tax an amount equal to 20 percent of the portion of the
underpayment to which section 6662 applies. Section 6662(b)(1)
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