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receipts, or checks evidencing the conduct of any activity in
Colombia were offered into evidence by petitioners. Moreover,
there was no income derived from any Colombian activity for the 2
years in question. No evidence was offered, for example, of
correspondence from potential customers or other sources that
would relate to the purported activity.
On this record, the Court holds that there was no activity
conducted by petitioners for the 2 years at issue; consequently,
it follows that there are no expenses allowable as deductions
from that nonexistent activity. The Court, therefore, need not
address whether the activity was not engaged in for profit
because there was no activity.
Respondent determined that petitioners are liable for
penalties under section 6662(a) for negligence or disregard of
rules or regulations. In pertinent part, section 6662 imposes an
accuracy-related penalty equal to 20 percent of the portion of an
underpayment of tax that is attributable to negligence or
disregard of rules or regulations. Sec. 6662(a), (c). Section
6662(c) defines “negligence” as including any failure to make a
reasonable attempt to comply with the provisions of the Internal
Revenue Code and defines “disregard” as including any careless,
reckless, or intentional disregard. However, under section
6664(c), the penalty under section 6662(a) shall not be imposed
with respect to any portion of the underpayment if it is shown
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Last modified: May 25, 2011