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penalty of $91,498.20, and a section 6651(a)(1) addition to tax
of $22,693.10 for failure to file timely. With regard to the
income tax deficiency, we decide whether petitioners’ claimed
trade or business expense deductions are allowable. We hold they
are not. We also decide whether petitioners are liable for the
accuracy-related penalty. We hold that they are. Petitioners do
not dispute that their income tax return was filed untimely and
do not assert that a reasonable basis existed for their late
filing. We sustain the addition to tax without further comment.
FINDINGS OF FACT
The parties have filed with the Court stipulated facts and
exhibits. The stipulated facts are found accordingly.
Petitioners are husband and wife, and they jointly filed a 2001
Form 1040, U.S. Individual Income Tax Return. They resided in
Lincoln, California, when their petition was filed with the
Court.
A. Petitioner’s Business History
Robert Tarter (petitioner) went into business for himself in
approximately 1991, beginning B & B Construction (B&B). B&B was
engaged in the business of preparing and pouring concrete
foundations and flatwork for residential projects.
B&B operated as a sole proprietorship at its inception and
was still operating as a sole proprietorship at the beginning of
2001. On December 15, 2000, petitioner formed BBT Enterprises,
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