Richard V. Frederick and Nancy M. Frederick - Page 14

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               As previously noted, section 162(a) generally allows                   
          deductions for ordinary and necessary expenses paid or incurred             
          in carrying on the taxpayer’s trade or business.  Petitioners               
          claim that Morgan Farms was a trade or business during 1999, but            
          petitioner’s vague testimony on the point compels us to conclude            
          otherwise.  Petitioner conceded entitlement to the deductions               
          attributable to Morgan Farms that petitioners claimed on their              
          1998 return-–he should have made a similar concession for 1999.             
          Petitioners are not entitled to the deductions claimed on the               
          Schedule C included with their 1999 return.  Respondent’s                   
          disallowances of those deductions are sustained.                            
                              Section 6662(a) Penalty                                 
               For each year in issue, respondent imposed a penalty under             
          section 6662(a) on the ground that the underpayment of tax                  
          required to be shown on petitioners’ return is due to negligence            
          or disregard of rules or regulations.  Sec. 6662(a) and (b)(1).             
          Negligence is defined to include any failure to make a reasonable           
          attempt to comply with the provisions of the Internal Revenue               
          Code.  Sec. 6662(c).  It is further defined as the failure to do            
          what a reasonable person with ordinary prudence would do under              
          the same or similar circumstances.  Neely v. Commissioner, 85               
          T.C. 934, 947 (1985).  Disregard is defined to include any                  
          careless, reckless, or intentional disregard.  Sec. 6662(c).  An            
          accuracy-related penalty is not imposed with respect to any                 






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