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OPINION
We are asked to decide whether petitioner may deduct
$158,381 as a business bad debt in 1998. Respondent argues that
petitioner may not deduct $158,381 as a business bad debt because
petitioner has not substantiated the amount of the deduction nor
established that the debt became worthless in 1998. Respondent
also argues that the accuracy-related penalty should be imposed.
Petitioner admits that he does not have records supporting
the deduction. Petitioner asserts that respondent is estopped
from arguing that petitioner lacks the requisite documentation
because respondent audited petitioner’s gross receipts for 1994
and that year has been settled. Petitioner also argues that he
has established that Brooks Foods owed Egan Oil more than the
$158,381 claimed and that it is irrelevant when petitioner
claimed the deduction because the deduction would have resulted
in a net operating loss that petitioner could have carried
backward or forward under section 172. Sec. 172(b)(1)(A). On
this basis, petitioner also argues that the accuracy-related
penalty should not be imposed. We address each issue in turn.
We begin with the burden of proof.
I. Burden of Proof
In general, the Commissioner’s determinations in the
deficiency notice are presumed correct, and the taxpayer bears
the burden of proving that the Commissioner’s determinations are
in error. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933). Under certain circumstances, however, section 7491(a)
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