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Additions to Tax and Penalties
Respondent determined that petitioners were liable for
additions to tax under section 6651(a)(1) for 1989 and 1990
because they failed to file timely returns or to show they had
reasonable cause for that failure. Respondent also determined
that for 1991 and 1992 petitioners were liable for an accuracy-
related penalty under section 6662(a) and (b)(1) because the
underpayment of tax for those years was due to negligence or the
intentional disregard of rules or regulations. Additionally,
respondent determined that for 1989, 1990, and 1993 petitioners
were liable for an accuracy-related penalty under section 6662(a)
and (b)(2) because the underpayment of tax for those years was
due to a substantial understatement of their income tax.
OPINION
Section 61(a) provides that gross income means all income
from whatever source derived. That section has been interpreted
broadly to encompass all gains except those specifically exempted
by Congress. See Commissioner v. Glenshaw Glass Co., 348 U.S.
426, 430 (1955).
Section 162(a) permits a taxpayer to deduct expenses paid or
incurred during the taxable year in carrying on the taxpayer’s
trade or business. Deductions are strictly a matter of
legislative grace, however, and the taxpayer bears the burden of
proving that he or she is entitled to the claimed deductions.
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