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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.
OPINION
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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