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Commissioner, 39 F.3d 402, 408 (2d Cir. 1994), affg. T.C. Memo.
1993-480; Freytag v. Commissioner, 89 T.C. 849, 888 (1987), affd.
904 F.2d 1011 (5th Cir. 1990), affd. 501 U.S. 868 (1991);
Kozlowski v. Commissioner, T.C. Memo. 1993-430, affd. without
published opinion 70 F.3d 1279 (9th Cir. 1995).
The Friscias underreported their income for 1994 by $28,215,
and Michael Friscia underreported his income for 1995 by $4,196.
Though their returns were prepared by an accountant, the Friscias
did not present any evidence to show that the underreporting was
due to any act of their accountant or reliance upon his advice.
The Friscias contend that the accuracy-related penalty should
not apply because their records were destroyed in a 1996 flood.
We have found as a fact that the Friscias underreported their
income. The Friscias have admitted that at least a portion of the
underreported amount stems from their own negligence, such as
deducting personal expenses as Amway business expenses. The
Friscias’ failure of proof as to the remaining amounts of
underreported income provides no basis for a finding of reasonable
cause.
Accordingly, we find that the Friscias and Michael Friscia
are liable for the accuracy-related penalty for 1994 and 1995,
respectively.
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