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Petitioners proffered no evidence to prove such payment.
Therefore, as U.S. citizens or residents, petitioners must pay
U.S. taxes in full, and the Treaty provides no relief to them in
the present case.
We observe that despite petitioners’ allegations, sections
871 and 992 have no application here. Section 871 does not apply
because petitioners are residents of the United States.
Likewise, section 992 does not apply because petitioners’
billiard hall was not a corporation.
In view of the above, we hold that petitioners have failed
to establish that the excess bank deposits came from a nontaxable
source or were otherwise exempt from U.S. tax. Accordingly, we
sustain respondent’s determination with respect to the unreported
income in the amount of $137,221.
III. Accuracy-Related Penalty
Section 6662 provides that a taxpayer may be liable for a
penalty of 20 percent on the portion of an underpayment which is
attributable to, among other things, substantial understatement
of tax.8 The term “understatement” for that purpose means the
excess of the amount of tax required to be shown on the return
for the taxable year, over the amount of tax imposed which is
8 Respondent also alleged negligence on part of petitioners
for the purpose of providing an additional ground for imposing an
accuracy-related penalty. In that we decide the accuracy-related
penalty issue on the basis of understatement, we need not and do
not address this argument.
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