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to default under a deed of trust or the fact that their
withholdings increased from $3,424 in 1992 to $5,952 in 1993; and
(ii) respondent incorrectly believed that petitioner Nancy Flynn
separately owned a house worth $400,000 with a $300,000 mortgage.
We disagree that these points show that respondent lacked a
reasonable basis in fact.
Petitioners allege that respondent lost files and documents
and that losing files is evidence of procedural irregularities in
processing petitioners’ case; however, the record does not
support that allegation.
d. Conclusion as to Respondent’s Basis in Fact
We conclude that respondent had a reasonable basis in fact
on January 13, 2000, for denying petitioners’ request for relief
from the 1993 late payment addition.
4. Whether Respondent Had a Reasonable Basis in Law
We next decide whether respondent had a reasonable basis in
law on January 13, 2000, for concluding that petitioners were
liable for the late payment addition for 1993.
Respondent’s basis in law for that position is section
6651(a)(2), the regulations thereunder, and numerous cases citing
those sections. Section 6651(a)(2) and the related regulations
provide respondent with a clear basis in law for respondent’s
position that petitioners are liable for the late payment
addition for 1993. Section 6651(a)(2) provides that taxpayers
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