- 15 - There is no evidence in the record relevant to ascertaining petitioners’ liability for the accuracy-related penalties with respect to the unreported lawsuit proceeds: Their authority or rationale for reporting only a portion of the $30,000 payments received from the lawsuit is unknown. The fact that petitioners reported the bulk of the payments--the portions representing interest--indicates they may have been advised to exclude the amounts representing principal on the authority of Bent v. Commissioner, 87 T.C. 236 (1986), affd. 835 F.2d 67 (3d Cir. 1987). Regardless, because the record is devoid of any facts concerning this issue, and because respondent bears the burden of proof, we hold that petitioners are not liable for the increased penalties sought by respondent in his amended answer. Petitioners, however, failed to show that SFIS was engaged in a business, they did not produce books and records for SFIS, they did not provide substantiation for any of the individual expenses shown on the tax return of SFIS, and they did not show any effort to assess their proper tax liability with respect to the losses from SFIS claimed on their individual returns for the years in issue. We find petitioners to be negligent, and we sustain respondent’s determination that petitioners are liable for the accuracy-related penalties, with respect to the claimed deductions for losses from SFIS.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011