- 6 - the cost of commencing and engaging in the farming of jojoba by claiming, inaccurately, that capital expenditures in jojoba plantations might be treated as research or experimental expenditures for purposes of claiming deductions under section 174." Id. As a result of Blythe II's TEFRA proceeding, petitioners were assessed tax deficiencies of $20,933 for 1982 and $1,006 for 1983, plus interest. Subsequently, respondent issued a notice of deficiency to petitioners, for 1982 and 1983, for affected items, determining that petitioners are liable for the additions to tax for negligence under section 6653(a)(1) and (2) and a substantial understatement of tax under section 6661 for 1982. These additions to tax are the subject of the instant case. The first issue is whether petitioners are liable for the additions to tax for negligence under section 6653(a)(1) and (2) for both years at issue. Section 6653(a)(1) imposes an addition to tax in an amount equal to 5 percent of an underpayment of tax if any part of the underpayment is due to negligence or intentional disregard of rules or regulations. Section 6653(a)(2) imposes another addition to tax in an amount equal to 50 percent of the interest due on the portion of the underpayment attributable to negligence or intentional disregard of rules or regulations. Respondent’s determinations in a notice of deficiency are presumed correct, and petitioners must establishPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011