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Petitioner argues that the payments by JJH to CCA, Coastal,
and Craig were deductible because JJH transferred funds to these
entities “in the normal course of its business”. We disagree.
Petitioner has put forth no credible evidence that these payments
by JJH to these entities or to Craig are deductible. To the
contrary, petitioner’s own statements support our finding that
the funds were circulated without a business purpose to fund
petitioner’s personal expenses. We reject petitioner’s argument
that the amounts paid to Simmons are deductible interest
payments. Simmons admitted he rented the Muehl residence to
petitioner, and the fact that Simmons reported the payments from
petitioner as “interest” on his return is unpersuasive since it
was petitioner who prepared this return. Finally, petitioner
argues generally that all amounts paid by JJH are deductible
because “Personal living expenses, when provided by an employer,
are not income to the person who receives it”. Petitioner’s
argument is without merit, and, on the basis of his knowledge and
experience, petitioner knows it. We find all other testimony and
evidence not discussed herein in favor of additional deductions
to be unpersuasive or incredible.
Fraud Penalty Under Section 6663
We turn now to the fraud penalty. Respondent bears the
burden of proving by clear and convincing evidence that
petitioners are liable for the penalty for fraud. See sec.
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