Kanhua and Lihying Young - Page 8




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          business activity in the years in issue.  Petitioner has provided           
          no records to show that the expenses claimed were actually                  
          incurred, as required by section 6001, although petitioner claims           
          to keep adequate records with regard to her activities.  We                 
          conclude that petitioners are not entitled to the claimed                   
          expenses pursuant to section 162 and are thus not entitled to the           
          net losses claimed in the amounts of $29,913 and $19,393 for 1994           
          and 1995, respectively.  Respondent is sustained on this issue.             
               4.  Accuracy-Related Penalty Under Section 6662(a)                     
               Respondent determined petitioners were liable for the                  
          accuracy-related penalty under section 6662(a) for 1994 and 1995.           
          The accuracy-related penalty is equal to 20 percent of any                  
          portion of an underpayment of tax required to be shown on the               
          return that is attributable to the taxpayer's negligence or                 
          disregard of rules or regulations.  See sec. 6662(a), (b)(1).               
          "Negligence" consists of any failure to make a reasonable attempt           
          to comply with the provisions of the Internal Revenue Code.  Sec.           
          6662(c).  "Disregard" consists of any careless, reckless, or                
          intentional disregard.  Id.                                                 
               An exception applies to the accuracy-related penalty when              
          the taxpayer demonstrates (1) there was reasonable cause for the            
          underpayment, and (2) he acted in good faith with respect to such           
          underpayment.  Sec. 6664(c).  Whether the taxpayer acted with               
          reasonable cause and in good faith is determined by the relevant            





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