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an understatement as to which the taxpayer acted with reasonable
cause and in good faith. See sec. 6664(c)(1).
Petitioners failed to establish that they were not negligent.
In claiming the deductions at issue, they failed to follow the rules
and regulations either because they failed to determine what the
rules require, or they acted in disregard of them. Petitioners,
through HPD-Latigo, improperly attempted to use a profit
participation fee in order to decrease their tax liability.
Petitioners also failed to maintain adequate records or otherwise
substantiate the alleged travel and automobile deductions. Finally,
petitioners failed to offer any evidence that they should not be
subject to the accuracy-related penalty. Accordingly, we hold that
petitioners are liable for the section 6662(a) accuracy-related
penalty.
In reaching our conclusions herein, we have considered all
arguments presented and, to the extent not discussed above, find
them to be irrelevant or without merit. To reflect the foregoing,
Decision will be
entered for respondent.
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