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in 2001, and it is unclear whether petitioner provided the
preparer with a copy of the Schedule K-1. Petitioner made no
attempt to ascertain the correct amount of tax. Petitioner owned
his interest in the S corporation since 1998,8 and even if he
sold the business in April 2001 as he contends, a reasonable
taxpayer would have known he was responsible for a pro rata share
of the S corporation’s income. Further, even if petitioner
believed that he incurred a loss from the sale of his Edgington
Mullins stock, a reasonable taxpayer would have reported the
transaction as a capital loss. Accordingly, we sustain a penalty
under section 6662.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be
entered under Rule 155.
8 In his Memorandum of Authorities, respondent stated that
petitioner reported losses from Edgington Mullins for all years
prior to 2001 and that petitioner must have known that Schedule
K-1 items are reportable on his individual return.
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Last modified: May 25, 2011