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After this case was commenced, petitioner and respondent met
and exchanged information and documents which resulted in
respondent’s concession of the income tax deficiency and the
section 6663(a) fraud penalty for petitioner’s 1989 tax year.
The remaining issues we must consider are (1) whether petitioner
is entitled to Schedule C deductions in excess of those allowed
by respondent; (2) whether petitioner is liable for the fraud
penalty for 1990 or 1991; (3) as an alternative to fraud, whether
petitioner is liable for the negligence penalty for 1990 or 1991;
(4) for 1991, whether petitioner is liable for the negligence
penalty for the omission of interest income and/or claiming a
loss from the sale of a taxi; and (5) whether petitioner is
liable for a late-filing addition to tax for 1991.
I. Is Petitioner Entitled to Business Deductions in Excess of
the Amounts Allowed by Respondent?
Petitioner claimed business deductions of $211,875 and
$254,787 for his 1990 and 1991 tax years. Respondent’s agent
examined records provided by petitioner and allowed petitioner
business deductions of $127,879 and $157,207 for the 1990 and
1991 tax years, respectively. Accordingly, petitioner’s business
deductions in the amounts of $83,996 and $97,580 for 1990 and
1991, respectively, remain in dispute.
Deductions are strictly a matter of legislative grace, and
taxpayers must comply with specific requirements for any
deduction claimed. See INDOPCO, Inc. v. Commissioner, 503 U.S.
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