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Allen. On Schedule C of petitioner’s 1986 tax return, he
deducted the costs of his subscriptions to Playboy and Penthouse
magazines.96 Petitioner also claimed as deductible expenses on
his Schedules C: (1) Subscription payments for Sesame Street and
Dr. Seuss books; and (2) travel and entertainment expenses for
credit card payments to Burdines, Neiman Marcus, Jordan Marsh,
Master Card, and Visa; and (3) expenses for gasoline and expenses
related to his 25 Ferrari automobiles. These items are
inherently personal in nature, and petitioner’s claiming those
deductions pursuant to his method of preparing his returns for
1985 through 1988 is evidence of fraud.
Petitioner also points to certain expenses which he claims
are related to his orange grove, cattle, and Ferrari collection
activities. He claims that respondent disallowed all expenses
relating to those activities, which he claimed on his returns.
Petitioner contends that, although it might be appropriate to
disallow expense deductions for those activities when determining
his deficiencies, fraud penalties should not be imposed on the
tax liabilities resulting from their disallowance. However, it
96Petitioner argues on brief that the Playboy magazine
“could be used by Mr. Medlin as reading material for his real
estate business”, and although he concedes those are not
allowable expenses, he suggests that such deductions are not
indicative of fraud. We disagree. Those items are inherently
personal and are items which we find someone in petitioner’s
position as a real estate businessman would have known were not
deductible. In our view, claiming those deductions on a return
shows a willingness to evade tax.
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