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business records. Lewellen credibly testified that he did not
know that petitioners improperly deducted personal expenses as
business expenses on their 1998 return. We reject petitioners’
attempt to shift the blame to Edgar for their deduction of
personal expenses as business expenses because petitioners
continued to improperly deduct personal expenses, such as
payments to their home gardener and to Kim Sterling for flowers,
in 1999 after Edgar left.
E. Accuracy-Related Penalty
Respondent contends that petitioners are liable for the
accuracy-related penalty for negligence on the portion of the
underpayment of their tax for each of the years 1998 and 1999
that is not due to fraud. A taxpayer may be liable for a penalty
of 20 percent on the portion of an underpayment of tax due to
negligence or disregard of rules or regulations. Sec. 6662(b).
However, section 6662 does not apply to any portion of an
underpayment subject to the fraud penalty under section 6663.
Id. In the case of a joint return where one spouse is found
liable for fraud, the accuracy-related penalty cannot be imposed
on the other spouse because imposing the accuracy-related penalty
on the other spouse, sec. 6663(c), would result in “impermissible
stacking”. Zaban v. Commissioner, T.C. Memo. 1997-479.
In court proceedings arising in connection with examinations
beginning after July 22, 1998, section 7491(c) places on the
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