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On the basis of the complete record, we hold that BERM did
not distribute its assets to petitioner during 1994; therefore,
petitioner is not entitled to deduct the operational or
abandonment losses claimed on his Schedule C. Accordingly,
respondent is sustained on this issue.
Section 6662(a)
The last issue for decision is whether petitioner is liable
for an accuracy-related penalty pursuant to section 6662(a).
Section 6662(a) imposes a penalty of 20 percent of the portion of
the underpayment which is attributable to negligence or disregard
of rules or regulations. See sec. 6662(b)(1). Negligence is the
“‘lack of due care or failure to do what a reasonable and
ordinarily prudent person would do under the circumstances.’”
Neely v. Commissioner, 85 T.C. 934, 947 (1985) (quoting Marcello
v. Commissioner, 380 F.2d 499, 506 (5th Cir. 1967), affg. 43 T.C.
6(...continued)
Tax Return, BERM was insolvent at the close of 1994. However,
BERM’s Form 1120X, Amended U.S. Corporation Income Tax Return,
reports an adjustment of $102,533, as “Management Fees Received”
in 1994, thus transforming BERM into a solvent corporation at the
close of 1994. At trial, petitioner testified that he did not
invest $102,533, but rather, he relieved the corporation of
$102,533 in loans he had previously made to the corporation in
1994. The record does not indicate any evidence of the amount of
loans petitioner made to BERM other than petitioner’s testimony
and the amended return. Also, the record contains no management
agreements which petitioner testified required him to indemnify
the corporation for any loss at the end of the year. On the
basis of the above, we do not accept petitioner’s self-serving
testimony in the absence of corroborating evidence. See
Niedringhaus v. Commissioner, 99 T.C. 202, 212 (1992).
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