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Petitioners have presented no reliable evidence that the
Lexus was a business asset. Although Mr. Wright testified that
his wife used the Lexus exclusively for business, she did not
appear at trial. Deductions related to passenger vehicles are
not allowable unless the taxpayer substantiates by adequate
records, or by sufficient evidence corroborating the taxpayer’s
own statement, the time, place, and business purpose of the
vehicle’s use. Sec. 274(d)(4). Although HJ Builders did not
claim a business expense deduction for the payment to Lexus,
petitioners argue that the payment is not income to the Wrights
because the Lexus vehicle was a business asset. No records of
use of the vehicle were provided by petitioners. Therefore, we
conclude that the $12,155 payment to Lexus was a personal expense
of the Wrights paid by the corporation and thus a constructive
dividend distribution out of the corporation to Mr. Wright in
2001. Magnon v. Commissioner, supra at 993-994.
Section 6662 Penalties
Section 6662 imposes a 20-percent accuracy-related penalty
on any underpayment of Federal income tax attributable to a
taxpayer’s substantial understatement of income tax or negligence
or disregard of rules or regulations. Sec. 6662(a) and (b)(2).
Section 6662(c) defines “negligence” as including any failure to
make a reasonable attempt to comply with the provisions of the
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