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Mrs. Brown testified that petitioner was paid by cash and by
check. Mrs. Brown kept a payment ledger that indicates that the
Browns paid petitioner routinely during 1998 for his work. The
record contains seven checks that are appropriately shown on the
ledger and were endorsed by petitioner. The ledger also contains
the initials “LB” by most of the entries made. Mrs. Brown
testified that they were petitioner’s initials. The formation of
the letters “LB” on the ledger strongly resembles the formation
of those letters on the canceled checks that were endorsed by
petitioner. In addition, a written agreement for independent
contracting services, dated January 2, 1998, was executed by
petitioner.
Petitioner initially denied receiving any money from the
Browns. When confronted with the canceled checks, he reluctantly
conceded that he had received those checks. Furthermore, when
petitioner was asked what he lived on during 1998, he was totally
evasive stating that “I’m not just helpless. I do little
ordinary things. I’ve made a dollar bill [sic?].” Those dollars
“here and there” were not reported on petitioners’ tax return.
In short, we accept the Browns’ (and respondent’s) version of the
transactions between petitioner and the Browns.
Next, we turn to the question of the penalty. Section
6662(a) provides that, if the section applies, there is imposed a
penalty in an amount equal to 20 percent of the portion of the
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