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light of the experience, knowledge, and education of the taxpayer
may indicate reasonable cause and good faith. Remy v.
Commissioner, T.C. Memo. 1997-72.
In the notice of deficiency, respondent applied the section
6662(a) penalty to all adjustments for the year at issue. The
underpayment resulted from respondent's total disallowance of
petitioners' claimed cost of goods sold and deductions for car
and truck expenses and depreciation in connection with Spanky's,
as well as computational adjustments made in relation thereto.
As discussed above, petitioners are entitled to reduce their
business gross receipts by a cost of goods sold of $2,500;
however, respondent's disallowance of the car and truck expenses
and depreciation deductions has been sustained. Petitioners'
evidence fell short of what was required to allow the bulk of the
claimed cost of goods sold or any of the claimed car and truck
expenses and depreciation deductions. Furthermore, petitioners
presented no evidence to show that they used due care in
deducting the disputed items on their 1997 return that were
subsequently adjusted in the notice of deficiency and sustained
by this Court in favor of respondent, nor did petitioners present
evidence to show that they had reasonable cause to deduct such
items. Petitioners failed to maintain adequate books and records
to support the majority of the costs and deductions claimed in
connection with their business. Therefore, the Court finds that
petitioners negligently or intentionally disregarded rules or
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