- 14 -
Memo. 1983-198. We are satisfied that Mr. Cotton did incur some
expenses for these items. See Cohan v. Commissioner, supra. We
hold that Mr. Cotton incurred $800 in expenses in each of the
years 1994, 1995, and 1996.7
7. Real Estate Taxes
Generally, State and local real property taxes are
deductible in the year in which they are paid or accrued. See
sec. 164(a)(1); sec. 1.164-3(b), Income Tax Regs.
In 1996, Mr. Cotton deducted $2,804 for real property taxes.
Mr. Cotton did not provide evidence of payment, such as books,
records, canceled checks, or property tax assessments, to
substantiate the amount of tax paid or accrued in 1996.
Therefore, Mr. Cotton is not entitled to a deduction for real
property taxes for 1996.
8. Accuracy-Related Penalty
Respondent determined that each petitioner is liable for the
accuracy-related penalty under section 6662(a) for 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
7 Mr. Cotton is not entitled to a deduction for 1994 and
1995 as previously indicated. After concessions and our
holdings, Mr. Cotton’s itemized deductions for 1994 and 1995 do
not exceed the standard deduction. See sec. 63(c). As to 1996,
sec. 67 imposes a 2-percent floor on miscellaneous itemized
deductions. It would appear that the $800 does not exceed the 2-
percent floor.
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