Larry M. Levy and Diane Levy - Page 12




                                       - 12 -                                         
          years in issue, they are not entitled to the full deduction in              
          1991.  See sec. 165(f).                                                     
          IV. Expense Deduction                                                       
               Petitioners contend, in the alternative, that they are                 
          entitled to a section 162(a) deduction relating to an ordinary              
          and necessary business expense.  Section 162(a) provides that a             
          taxpayer engaged in a trade or business may deduct all ordinary             
          and necessary expenses.  Petitioners have failed to establish               
          that JTFJ’s corporate expenses were the ordinary and necessary              
          expenses of their trade or business.  Petitioners, therefore, are           
          not entitled to deduct the advances and guaranty payments as                
          ordinary and necessary business expenses pursuant to section                
          162(a).                                                                     
          V.   Accuracy-Related Penalty                                               
               Respondent determined that petitioners were negligent in               
          determining their 1991, 1992, and 1994 liabilities and are liable           
          for a section 6662 penalty.  The penalty applies to the portion             
          of petitioners’ underpayment that is attributable to negligence             
          or disregard of rules or regulations.  See sec. 6662(b)(1).                 
          Petitioners, relying on the advice of an attorney and an                    
          accountant, made a reasonable attempt to accurately report their            
          bad debt deduction.  See sec. 6664(c).  As a result, petitioners            
          are not liable for the accuracy-related penalty.                            








Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  Next

Last modified: May 25, 2011