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entries.12 On the record before us, we find that petitioner has
failed to establish that it provided correct information to Mr.
Miller when Ms. Wu gave him the purported product usage document.
See Ma-Tran Corp. v. Commissioner, 70 T.C. at 173.
On the instant record, we also reject petitioner’s conten-
tion that respondent’s determination under section 6662(a) is
wrong because “there is substantial authority for the deduction
of the Royalty Expense”. On that record, we find that all of the
authorities on which petitioner relies to support its position
regarding the claimed royalty expense deduction are distinguish-
able from the instant case. Consequently, petitioner’s reliance
on those authorities is misplaced.
12Mr. Miller testified, and we found as a fact, that he
confirmed with Mr. Braswell the correctness of booking the
royalty adjusting journal entries. On the record before us, we
find that Mr. Miller’s confirming with Mr. Braswell the correct-
ness of booking those entries is not equivalent to Mr. Miller’s
undertaking due diligence with respect to those entries such that
Mr. Miller assured himself of the correctness of those entries.
We note in this connection that Mr. Revel testified, and we found
as facts, the following: Shortly after the Vita-CMC agreement
was executed, Mr. Revel concluded that Mr. Braswell was not the
type of individual who involved himself in the bookkeeping and
accounting operations of the Braswell companies. Consequently,
whenever Mr. Revel had any questions under the Vita-CMC agreement
about the royalty payments made to CMC thereunder, he addressed
those questions to the employees working in the bookkeeping,
sales, and/or accounting departments of those Braswell companies
who compiled the figures needed to determine the royalties due
CMC under that agreement. On the record before us, we find that
petitioner has not shown that Mr. Braswell, whom petitioner did
not call as a witness at trial, was in a position to confirm the
correctness of booking the royalty adjusting journal entries
other than by expressing his personal opinion to Mr. Miller that
those entries were correct.
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