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business and is not entitled to a current deduction for
his R&D expenses.
Held, further, Ps did not adequately substantiate
other deductions disallowed by R.
Held, further, Ps are not liable for accuracy-
related penalties associated with the deduction of R&D
expenses. Ps are liable for accuracy-related penalties
with respect to their failure to substantiate other
disallowed deductions.
Robert R. Rubin, for petitioners.
Kathryn K. Vetter, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
RUWE, Judge: These cases were consolidated by motion of the
parties for purposes of trial, briefing, and opinion. In docket
No. 1821-00, respondent determined a deficiency in Federal income
tax of $103,250 and a section 6662(a)1 accuracy-related penalty
of $20,650 for the taxable year 1996 with respect to
petitioner Computer Power Software Group, Inc. (CPSG, Inc.). In
docket No. 555-00, respondent determined deficiencies in
petitioners David M. and Teri L. Saykally’s2 income taxes, an
addition to tax pursuant to section 6651(a)(1), and accuracy-
1All section references are to the Internal Revenue Code in
effect for the taxable years at issue, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
2Petitioners David M. and Teri L. Saykally filed joint
Federal income tax returns for the taxable years at issue.
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