- 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