Barbara A. Trimble-Gee - Page 11




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               C.   Interest, Wage, and Remaining Expenses                            
               As indicated above, respondent disallowed claimed deductions           
          for interest expense, wage expense, and remaining expenses, such            
          as rent, supplies, and utilities expenses.  Petitioner either               
          failed to establish that she paid or incurred these expenses, or            
          that they were incurred in connection with the cleaning business.           
          Respondent’s determination therefore is sustained.                          
          II. Accuracy-Related Penalty                                                
               Section 6662(a) provides that a taxpayer may be liable for a           
          penalty of 20 percent of the portion of an underpayment of tax              
          attributable to negligence or disregard of rules or regulations.            
          Sec. 6662(a) and (b)(1).  Negligence includes any failure by the            
          taxpayer to keep adequate books and records or to substantiate              
          items properly.  Sec. 1.6662-3(b)(1), Income Tax Regs.  Disregard           
          of rules or regulations includes any careless, reckless, or                 
          intentional disregard.  Sec. 1.6662-3(b)(2), Income Tax Regs.               
          The Commissioner bears the burden of production with respect to             
          the accuracy-related penalty.  See sec. 7491(c); Higbee v.                  
          Commissioner, 116 T.C. 438, 446 (2001).  An exception to the                
          section 6662(a) penalty applies when the taxpayer demonstrates              
          (1) there was reasonable cause for the underpayment, and (2) the            
          taxpayer acted in good faith with respect to the underpayment.              
          Sec. 6664(c).                                                               








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