Neal N. and Ruby W. Viar - Page 18

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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                    

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