William R. and Betty O. Bass - Page 5

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          Because miscellaneous deductions were not identified on                     
          Schedule C as attributable to Cal-Neva or to some other activity            
          on the part of petitioners, the IRS estimated disallowed amounts            
          as 50 percent of the miscellaneous expenses shown on Schedule C.            
          Thus, the adjustment on which the additions to tax were                     
          calculated totaled $14,783.69, including the $13,150 attributable           
          to Cal-Neva.                                                                
               Petitioners contend that they were not negligent and that              
          the additions to tax are inappropriate in this case.  They also             
          assert that the tax on which the additions to tax are computed              
          was overstated because of the manner in which the disallowed                
          expenses attributable to Cal-Neva were determined, because items            
          above and beyond $13,150 were not related to Cal-Neva but to                
          other activities in which petitioner engaged.  We accept                    
          petitioner’s testimony in this regard.  Our findings, however,              
          are otherwise sparse.  Petitioner provided no details concerning            
          the partnership.  His testimony at trial as to the extent of his            
          investigation of Cal-Neva consisted of the following:                       
                    I don’t recall exactly how the investment                         
               possibility came into being.  I don’t know whether it                  
               was a phone call, letter, or what, but anyway, we were                 
               contacted regarding the investment.                                    
                    Since I grew up on a farm, I thought that it had                  
               some potential.  I combined a trip to Nevada to meet                   
               with them with a trip by my employer, and I did meet                   
               with them.  They seemed to be honest people.  He had                   
               been in the airline industry, and she had worked as an                 

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