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liability. Stubblefield v. Commissioner, supra; sec. 1.6664-
4(b)(1), Income Tax Regs.
On this record, the Court holds that petitioners are liable
for the penalty under section 6662(a) with respect to the
Schedule C car and truck expenses, travel, meals, and
entertainment expenses. Mr. Viar offered the following
explanation for his failure to keep contemporaneous logs and
adequate records for his Schedule C expenses: “I had a rough
time during that five-year period. I used to keep MacAffie
receipts prior to that.” He further stated: “I think my
personal problems, my medical problems, I just didn’t keep the
receipts that I should have kept, and the ones I did keep, I
misplaced.” Nonetheless, the applicable legal standards on
deductibility and record keeping are clear, and Mr. Viar’s
testimony does not support a finding of reasonable cause for the
tax underpayment attributable to the items described.
Petitioners are also liable for the section 6662(a) penalty
with respect to the disallowed Schedule E expenses. The law is
clear that the use of a dwelling unit by a family member is
deemed personal. Petitioners did not exercise reasonable care in
the reporting of this item, nor did they take reasonable steps to
determine the law and comply with it. Respondent is sustained on
the penalty for the disallowed Schedule C and Schedule E
expenses.
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