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evidence in the record to suggest that the Castros unreasonably
delayed the proceedings.
We are not satisfied with the Castros’ position regarding
the validity of the trusts for Federal income tax purposes,
however. Their position was frivolous, and our conclusion in
this regard satisfies the statutory predicate for imposing a
penalty under section 6673. But section 6673 grants the Court
discretion in deciding whether to impose a penalty. See sec.
6673; Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43,
102 (2000). Exercising our discretion, we decline to impose a
penalty under section 6673 in these cases. Our decision on this
issue is based on several factors. Petitioner testified he
cooperated during the examination of the relevant tax returns
conducted by respondent’s agents and that he maintained records
of the jewelry business’ income and expenses during the years at
issue. The record supports a conclusion that the Castros
attempted to abide by the terms of the declarations of trust and
that they maintained records regarding the trusts. In addition,
there is no evidence to indicate that the Castros manipulated
income or exaggerated expenses with respect to the jewelry
business or that they engaged in any other transactions
structured to unreasonably reduce or eliminate their proper
income tax liability. Consequently, we decline to impose a
penalty under section 6673 upon the Castros. We caution the
Castros and their counsel, however, that if they present similar
arguments to this Court again, they invite the imposition of such
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