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maintain documents showing that the claimed expenses were
incurred or paid.
Petitioners rely on Rev. Proc. 98-25, 1998-1 C.B. 689, which
provides for the use of “machine sensible records” like Quicken
to satisfy their record keeping requirements. Petitioners’
understanding was that the revenue procedure permitted computer
records in lieu of other records that are required to be
maintained under section 6001. Under Rev. Proc. 98-25, section
11, 1998-1 C.B. at 693, however, taxpayers are not relieved from
the responsibility of retaining the hardcopy records from which
the computer records were derived; i.e., bills, invoices, etc.
received in the ordinary course of business. In that regard,
petitioners professed to have only the Quicken printouts.
Accordingly, petitioners have failed to show that they are
entitled to home office deductions claimed on their Schedule C
for 1997 or 1998 in excess of the amounts that respondent has
conceded they would be entitled to as Schedule A deductions.
F. Petitioners’ Liability for Section 6662 Penalties
Respondent determined that petitioners were liable for
penalties under section 6662(a) and (h). Respondent has conceded
that petitioners are not liable for a penalty under section
6662(h) but continues to maintain that petitioners are liable for
a penalty under section 6662(a) for negligence because they
failed to maintain adequate records.
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Last modified: May 25, 2011