Rogelio R. Balot and Zenaida V. Balot - Page 39




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          penalty based on a determination that the entire amount of the              
          deficiency is due to petitioners’ negligence.                               
          A.   Amounts of Deficiency                                                  
               The 1993 deficiency that respondent determined is due                  
          entirely to application of the bank deposits method.  Supra table           
          2, especially notes 6 and 7.  Our comments and conclusions in the           
          course of our analysis of the bank deposits method in Part II.              
          C., supra, apply equally to 1993.                                           
               We hold that, except as to respondent’s concessions and our            
          comments in supra table 2, notes 6 and 7, petitioners have failed           
          to show that respondent’s determination of omitted income was               
          excessive.                                                                  
          B.   Negligence                                                             
               Respondent determined that petitioners are liable for a 20-            
          percent negligence addition to tax on the entire underpayment for           
          1993.  Respondent contends petitioners’ failure to maintain and             
          furnish adequate records of their 1993 income-producing                     
          activities “thwarted respondent’s attempt to examine petitioners’           
          tax liability for that year.”  Petitioners maintain that section            
          6662 does not apply because reasonable cause excuses their                  
          failure to report all of their taxable income for 1993.                     











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