Gregory C. and Phyllis Lam - Page 6

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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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