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not authorized by law (such as transportation for charitable
purposes) show a pattern of negligence and disregard of the
applicable rules or regulations. Petitioners were put on notice
during the audit of their 1991 income tax return that they were
not entitled to deductions for estimated expenses or for expenses
that were not substantiated by receipts and records. Petitioners
are well-educated individuals who knew or should have known that
proper record keeping is essential to their entitlement to
deductions. Petitioner testified at trial that he was aware of
the record keeping obligations, that he was too busy to comply
with them, and that he would not change his methodology. With
respect to the claimed investment deductions for expenses of the
mutual funds, petitioners ignored information in their annual
reports that showed that income was reported on a net basis and
that they were not entitled to a deduction for the operating
expenses. Petitioners claimed the deductions mentioned above
without consulting an accountant or attorney. Their actions are
not the actions of reasonable and ordinarily prudent persons.
Thus, petitioners are liable for penalties under section 6662(a)
for both years in issue.
We have considered all remaining arguments made by
petitioners for a result contrary to that expressed herein, and,
to the extent not discussed above, they are irrelevant or without
merit.
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