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to deduct the portion representing nondeductible fees), the
notion of offsetting amounts that were never physically received
would not seem to a layman to be “too good to be true”.
Respondent’s contradictory positions at trial and in posttrial
briefs regarding the proper treatment of the United Ready Mixed
settlement proceeds support our finding that petitioner acted
reasonably and prudently when he relied on Mr. Binder regarding
the proper way to report the transaction.
On the other hand, petitioner is liable for an accuracy-
related penalty to the extent that petitioner’s disallowed cost
of goods sold reduction of $93,275 results in an underpayment.
Petitioner offered no evidence to support this claimed cost of
goods sold reduction in excess of the United Ready Mixed
settlement proceeds.
With respect to all years, petitioner is liable for an
accuracy-related penalty to the extent his underpayment is
attributable to the following items: (1) The disallowed net
operating loss carryforward deductions, (2) the disallowed
depreciation deductions, and (3) the unreported income petitioner
is required to recognize. Petitioner’s treatment of these items
was negligent and in disregard of rules and regulations, and his
purported reliance on his accountant was not reasonable.
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