G.B. Data Systems, Inc. - Page 13




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          Accordingly, we sustain respondent’s determination disallowing                
          the royalty expense deduction that petitioner claimed in its tax              
          return for that year.                                                         
          Accuracy-Related Penalty Under Section 6662(a)                                
               Respondent determined that petitioner is liable for the year             
          at issue for the accuracy-related penalty under section 6662(a).              
          Petitioner contends that respondent’s determination is wrong                  
          because (1) “there is no underpayment of tax”; (2) “there is no               
          evidence that it was negligent or disregarded rules or regula-                
          tions”; and (3) “there is substantial authority for the deduction             
          of the Royalty Expense”.  Although it is not altogether clear,                
          petitioner also seems to contend that it is not liable for the                
          accuracy-related penalty because it relied on its accountant, Mr.             
          Miller, in deducting the claimed royalty expense in the Form 1120             
          that it filed for the year at issue.                                          


               10(...continued)                                                         
          that are not discussed herein, including the following alterna-               
          tive argument of petitioner:                                                  
                    Even assuming arguendo that the Royalty Expense                     
               was an expense of the other Related Entities [i.e., the                  
               Braswell sales corporations], the assumption by Peti-                    
               tioner of the marketing functions including the engage-                  
               ment of CMC’s services and ultimate liability for those                  
               services substantiates a deductible business expense to                  
               Petitioner under the principles articulated in Dinardo                   
               v. Commissioner, 22 T.C. 430 (1954).                                     
          We find Dinardo and the other cases on which petitioner relies to             
          support its alternative argument to be distinguishable from the               
          instant case and petitioner’s reliance on those cases to be                   
          misplaced.                                                                    





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