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Respondent has asked for the imposition of penalties
pursuant to section 6662. To the extent that petitioner’s case
fails, it does so largely because petitioner’s records bear
internal inconsistencies which make it difficult to rule in his
favor. This is primarily a factual determination, and does not
indicate that petitioner has taken an “unreasonable position.”
Furthermore, petitioner did enter significant amounts of
documentation into evidence. We take this factual documentation
into account in weighing whether a taxpayer should be subject to
section 6662 penalties. Kluener v. Commissioner, 154 F.3d 630,
637-38 (6th Cir. 1998). Additionally, section 1.6662-3(b)(2),
Income Tax Regs., specifically provides for an exception from
penalties in case of taxpayer reliance on any one of a number of
IRS-issued materials, including the information materials to
which petitioner frequently cited. Nevertheless, we uphold part
of the accuracy-related penalty. Sec. 6664(c)(1). The penalty
is properly applied to those portions of the deficiency relating
to the disallowed deductions from category 7 (books, recordings,
video); category 11 (performances, viewing); and category 13
(miscellaneous cash). Despite petitioner’s good faith efforts in
other areas, it is not credible to assert that he did not realize
the significant elements of personal benefit and documentation
issues inherent in these disallowed amounts.
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