Alvin S. Kanofsky - Page 20

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          trial, petitioner presented documentary evidence, by category, of           
          a portion of his claimed 1997 expenses.  Moreover, the examining            
          agent’s 1997 Explanation of Items treats as either deductible on            
          Schedule A, capitalizable, or nondeductible “personal or estate             
          expenses” all but $8,292 of petitioner’s total 1997 Schedule C              
          expenses, which indicates that petitioner substantiated all but             
          $8,292 of those expenses during the audit.                                  
               Petitioner claimed 1997 Schedule C expenses of $75,388 and,            
          at trial, offered documentary evidence that, at best,                       
          substantiates the expenditure of approximately one-half of that             
          amount.  That lack of substantiation in the record supports the             
          examining agent’s determination that petitioner’s Schedule C                
          deductions included $8,292 of unsubstantiated expenses, and we so           
          find.  Therefore, in accordance with section 1.6662-3(b)(1),                
          Income Tax Regs. (negligence includes “any failure by the                   
          taxpayer * * * to substantiate items properly”), we sustain the             
          negligence penalty with respect to petitioner’s 1997 underpayment           
          attributable to $8,292 of unsubstantiated expenses.                         

                                                  Decision will be entered            
                                             under Rule 155.                          











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