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It is well established that this Court is not bound to
accept a taxpayer’s self-serving, unverified, and undocumented
testimony. Tokarski v. Commissioner, 87 T.C. 74, 77 (1986);
Hradesky v. Commissioner, 65 T.C. 87 (1975). We find
petitioner’s testimony to be just that, self-serving, unverified,
and undocumented. As such, we conclude that petitioners have
failed to establish that they are entitled to the deductions
claimed on their Schedules C under section 162, much less under
the strict standards of section 274.
As to the accuracy-related penalty, section 6662(a) imposes
a 20 percent penalty on the portion of any underpayment of tax
attributable to negligence or disregard of rules or regulations.
Sec. 6662(b)(1). Negligence is any failure to make a reasonable
attempt to comply with the provisions of the internal revenue
laws and includes any failure by the taxpayer to keep adequate
books and records or to substantiate items properly. Sec.
6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. Moreover,
negligence is the failure to exercise due care or failure to do
what a reasonable and prudent person would do under the
circumstances. Neely v. Commissioner, 85 T.C. 934, 947 (1985).
Disregard includes any careless, reckless, or intentional
disregard of rules or regulations. Sec. 6662(c); sec. 1.6662-
3(b)(2), Income Tax Regs. No penalty will be imposed with
respect to any portion of any underpayment if it is shown that
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Last modified: May 25, 2011