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do not find to be reliable.4 Petitioners did not produce a
single item of corroborating evidence, such as a ledger, time
log, bank account record, receipt, or invoice.
Petitioners have not shown that petitioner and SFIS were
involved in any activity with continuity and regularity, and they
have not shown that any of the objective factors enumerated above
demonstrate an intent to profit. We therefore find that SFIS was
not engaged in a trade or business and is not entitled to any
business expense deductions. Sec. 162(a); Commissioner v.
Groetzinger, supra. With no underlying trade or business, SFIS
is limited to the deductions allowed by respondent pursuant to
section 183(b). Sec. 183(a), (c).
Negligence
In the notice of deficiency, respondent determined that
petitioners are liable for accuracy-related penalties under
section 6662(a) of $595 in 1996 and $704.40 in 1997. This
determination is based upon the adjustments made with respect to
the disallowed SFIS losses. By amended answer, respondent seeks
to increase the penalties to $1,071 in 1996 and $1,270 in 1997.
This increase is based upon the unreported income from the
litigation proceeds.
4Petitioner testified that SFIS has been engaged in a
variety of activities, including real estate and sales of pre-
paid calling cards, gold coins, “a vitamin-type product that kind
of replaces Viagra”, and a “program for debt freedom”.
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