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jointly by petitioner and his ex-wife, and petitioner offers no
explanation for the charges listed. The cellular phone bill is a
statement of accounts for some months in 2001 and 2002, and it is
for petitioner’s business phone. The account lists petitioner’s
employer, the IRS, as the account holder. Petitioner offered no
evidence either that he was personally accountable for paying
this bill or that any of the charges made on the account were
related to RBS.
Based on the foregoing, we hold that petitioner is entitled
to deduct expenses in accordance with section 183(b)(2) of the
following: $3,000 for 2000;5 $3,044 for 2001; and $600 for 2002.
Accuracy-Related Penalty Under Section 6662
Respondent determined that petitioner is liable for an
accuracy-related penalty under section 6662(a) for each of the
taxable years in issue. Section 6662 imposes a penalty in the
amount of 20 percent of the portion of the underpayment to which
the section applies. As relevant to this case, the penalty
applies to any portion of the underpayment that is attributable
to any substantial understatement of income tax. Sec.
6662(b)(2). There is a “substantial understatement of income
tax” if the amount of the understatement exceeds the greater of
5 Sec. 183(b)(2) limits the amount that may be deducted to
gross income of the activity.
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