T.C. Memo. 2020-127
UNITED STATES TAX COURT
MALIK H. FRANKLIN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3855-18. Filed September 3, 2020.
Malik H. Franklin, pro se.
David M. Carl and Trent D. Usitalo, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
NEGA, Judge: By notice of deficiency dated November 16, 2017,
respondent determined a $65,363 deficiency, a $6,537 section 6551(a)(1) addition
to tax, and a $13,073 section 6662(a) accuracy-related penalty with respect to -2-
[*2] petitioner’s Federal income tax for 2014 (year at issue).1 After concessions,2
the issues for decision are: (1) whether meal and entertainment expenses and
travel expenses are deductible as claimed on petitioner’s Form 1040, U.S.
Individual Income Tax Return, and Schedule C, Profit or Loss From Business;
(2) whether petitioner is entitled to deduct business losses relating to certain loans
and business properties; and (3) whether petitioner is liable for the
accuracy-related penalty and the late-filing addition to tax.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated facts are
incorporated in our findings by this reference. Petitioner resided in the State of
California when the petition was timely filed.
I. Petitioner’s Background
Petitioner holds bachelor degrees in computer science and economics from
Dartmouth College and a master of business administration degree from the Tuck
1 Unless otherwise indicated, all section references are to the Internal Revenue Code (Code) in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded to the nearest dollar. 2 Petitioner conceded respondent’s $136 adjustment to his interest income and $39,758 adjustment to his Schedule C depreciation and sec. 179 expenses. -3-
[*3] School of Business at Dartmouth. In 2003 petitioner married Wendy Liu,
with whom he had one child.
On February 17, 2007, petitioner and Ms. Liu purchased a timeshare
property in Las Vegas, Nevada (timeshare property). In addition to the timeshare
property, petitioner and Ms. Liu jointly owned residential real property in San
Ramon, California (San Ramon property). Petitioner and Ms. Liu divorced in
2010. On October 29, 2014, Ms. Liu transferred her interest in the timeshare
property to petitioner by quitclaim deed.
Between 2005 and 2012 petitioner worked as a real estate investment
banker with Bank of America Securities and then with RBC Capital Markets. For
2013 and part of 2014 he rented an apartment in Brooklyn, New York, with his
fiance, Olanika Fajana. On March 15, 2014, petitioner and Ms. Fajana moved to
an apartment in Jersey City, New Jersey, and on March 28, 2014, they were
married. Shortly thereafter, on June 10, 2014, petitioner and Ms. Liu sold the San
Ramon property. During 2014 petitioner’s son and Ms. Liu resided exclusively in
California. Petitioner saw his son and Ms. Liu while on trips to California for
which he claimed business deductions. -4-
[*4] II. Northbridge Group, Northbridge Partners, and Integrated Health Centers
In 2014 petitioner provided real estate brokerage services on behalf of
Northbridge Group, Inc. (Northbridge Group), a California corporation. Petitioner
worked as an independent contractor and was compensated a fixed percentage of
the brokerage fees Northbridge Group charged its clients. Northbridge Group
reported on Form 1099-MISC, Miscellaneous Income, that it paid petitioner
$293,250 in 2014 in nonemployee compensation.
In addition to Northbridge Group, petitioner provided real estate investment
consulting services in 2014 as a member of Northbridge Partners, LLC3
(Northbridge Partners), a California limited liability company.3 Petitioner reported
no income or losses in relation to his work for Northbridge Partners that year.
In 2014 petitioner also performed real estate investment consulting for
Integrated Health Centers (IHC). IHC’s business purpose was to develop a
network of high quality hospitals in Lagos, Nigeria. Petitioner reported no income
from his services for IHC but claimed business deductions for travel expenses and
meals and entertainment expenses in connection with IHC.
3 Northbridge Group and Northbridge Partners were organized and managed by the same individual. On any given development project, Northbridge Group served as the brokerage affiliate and Northbridge Partners provided investment consulting and financial advisory work. -5-
[*5] At all relevant times petitioner did not maintain an office outside of his
residences on the east and west coasts. Petitioner’s actual work was done mostly
on his computer and phone.
III. Petitioner’s Schedule C
Petitioner untimely filed his Form 1040 for 2014. He attached Schedule C
to his return and reported gross income of $293,250 and business expenses of
$141,402.4 He prepared his 2014 tax return and did not keep contemporaneous
records of his business expenses for the year.
After receiving notice that the IRS was examining his 2014 return,
petitioner created three travel logs to substantiate his travel expenses. The first
travel log was created immediately after he received notice of examination of his
2014 return and was submitted with the petition. This first travel log was an
incomplete record of his travel expenses and was created in large part from
memory. He subsequently created a second travel log based on his credit card
statements, bank account statements, and receipts for 2014, and he submitted this
second travel log with accompanying receipts to respondent’s Office of Appeals
after he filed the petition. He subsequently created a third travel log dated
February 19, 2019, which was delivered to respondent’s counsel. None of his
4 Petitioner’s gross receipts came from Northbridge Group alone. -6-
[*6] three travel logs explains in detail the connection between the expenses listed
and his work with Northbridge Group, Northbridge Partners, or IHC. At trial he
conceded that his foreign travel costs were not deductible as business expenses.
Petitioner also created a meal log that he submitted to respondent’s Office
of Appeals after filing his petition. Petitioner’s meal log included expenses for
meals at restaurants both foreign and domestic, all ranging from $50 to $300.
Petitioner’s meal log included several charges for meals with his former spouse
and his current spouse and asserted unconvincingly that the purpose of these
meetings was to discuss real estate opportunities. Petitioner did not explain the
connection between the expenses listed and his work with Northbridge Group,
Northbridge Partners, or IHC.
Respondent disallowed petitioner’s Schedule C deductions for travel
expenses of $64,655 and meal and entertainment expenses of $8,610.
IV. Sales of Business Property
Petitioner reported losses of $86,640 on his Form 4797, Sales of Business
Property, which consisted of the following: (1) worthless loans to Sterling
Analytics, Inc. (Sterling), of $45,804; (2) worthless loans to Strategic Urban
Development Alliance, LLC (SUDA), of $18,575; (3) loss of software of $3,495;
and (4) an abandoned timeshare of $18,766. Following the examination, -7-
[*7] respondent disallowed the entirety of these losses. Petitioner subsequently
submitted documents to respondent’s Office of Appeals amending the losses
reported on his Form 4797 to $95,230. His amended losses consisted of the
following: (1) loans to Sterling totaling $50,000; (2) a loan to SUDA of $17,500;
(3) loss of software of $3,495; and (4) an abandoned timeshare of $24,235.5
A. Bad Debt Deductions
1. Sterling
In 2011 and 2012 petitioner made two loans of $25,000 each to Sterling, a
Delaware corporation in San Francisco, California, that produces software used by
real estate investors. On November 5, 2012, petitioner and Sterling consolidated
the two loans and executed a promissory note under which Sterling agreed to pay
petitioner $50,000 and interest by November 5, 2017, or upon default. Petitioner
had the option to convert this debt into equity, but he never exercised this option.
On his Form 4797 petitioner reported loans he had made to Sterling were
worthless and deducted their entire value of $50,000 minus allowable depreciation
5 According to the stipulation of facts and petitioner’s amended petition, petitioner’s reported losses consisted of the following items: (1) two worthless loans to Sterling totaling $50,000; (2) a worthless loan to SUDA totaling $35,000, of which petitioner deducted $17,500; (3) loss of software totaling $3,495; and (4) an abandoned timeshare property totaling $24,235. However, respondent’s pretrial memorandum states that petitioner reported a loss of $18,766 for the abandoned timeshare, rather than $24,235. -8-
[*8] of $4,196, totaling $45,804. Petitioner did not submit information with his
return establishing that the loans were worthless or how he determined the
allowable depreciation. When petitioner determined the loans were worthless, he
lacked specific knowledge about the value of Sterling’s assets or liabilities.
Petitioner stated that it became clear in 2014 that Sterling’s business was
struggling, was not winning new customers, and was on a path to failure.
Petitioner never attempted to contact Sterling to collect on the note before or
during 2014, and he never brought suit to collect on the note from Sterling.
2. SUDA
Petitioner claimed as deductible losses $18,575 in loans made to SUDA, a
real estate development company in Oakland, California. Petitioner lent SUDA
and its managing partner and chief executive officer, Alan Dones, a total of
$35,000, which was evidenced by a promissory note dated August 8, 2014, and
due February 8, 2015. The note granted petitioner a security interest in five
parking stalls in Oakland. The loan proceeds were used to facilitate a real estate
development project in Oakland. The promissory note was convertible into equity
in the development project at a value of 1-1/2 times the original total loan amount
of $35,000, i.e., $52,500, but petitioner never exercised this option. -9-
[*9] On his Form 4797, petitioner claimed a loss of $18,575 attributable to the
loans.6 Petitioner determined this amount by identifying the difference between
his convertible equity position, $52,500, and the loan principal, $35,000. When
petitioner determined the loans were worthless, he lacked specific knowledge
about the values of Mr. Dones’ and SUDA’s assets or liabilities, and he believed
the value of the collateral exceeded the amounts of the loans. Mr. Dones did not
pay the debt when due, and petitioner first contacted him regarding collection of
the debt on February 13, 2015.
B. Loss of Software
Petitioner claimed as a deductible loss $3,495 for software used in his real
estate consulting business. Petitioner acquired the software on October 30, 2012.
The software was lost after a computer crash in 2014. Petitioner does not know
his initial cost basis in the software or the method of depreciation used for the
period before the computer crash in 2014.
6 On his Form 4947 petitioner claimed a loss of $18,575. In a written statement to respondent’s Office of Appeals submitted after the petition was filed, petitioner wrote that “the tax filing shows an error in the amount of $18,575, this should be $17,500.” - 10 -
[*10] C. Abandoned Timeshare Property
Petitioner reported a loss of $18,766 on his Form 4797 in connection with
the timeshare property.7 He provided no evidence other than his inconsistent
testimony showing that he used the timeshare in his trade or business, that the
timeshare was abandoned, or that his interest in the timeshare was worthless in
2014.
OPINION
I. Burden of Proof
The Commissioner’s determinations in a notice of deficiency are generally
presumed correct, and the taxpayer bears the burden of proving them erroneous.
Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933). In order to shift
the burden as to any relevant factual issue, the taxpayer must introduce credible
evidence and have complied with all substantiation and record keeping
requirements imposed by the Code. Sec. 7491(a)(1) and (2). The Commissioner
generally bears the burden of production and the taxpayer bears the burden of
persuasion with respect to an accuracy-related penalty under section 6662. See
7 After the filing of the petition, petitioner submitted a written statement to respondent’s Office of Appeals indicating that he erred when he reported on his Form 4797 a loss of $18,766 in the timeshare. He asserted that the actual loss he incurred in connection with the timeshare was $24,235. - 11 -
[*11] sec. 7491(c). The Commissioner also bears the burden of production and
the taxpayer bears the burden of persuasion with respect to a taxpayer’s liability
for additions to tax. Id. Petitioner does not contend, and the evidence does not
establish, that the burden of proof shifts to respondent under section 7491(a) as to
any issue of fact.
II. Schedule C Expenses
Section 162(a) allows as a deduction “all the ordinary and necessary
expenses paid or incurred during the taxable year in carrying on any trade or
business”. Petitioner bears the burden of proving that reported business expenses
were actually paid and were ordinary and necessary. See sec. 162(a); Rule 142(a).
An expense is ordinary if it is normal, usual, or customary in the taxpayer’s trade
or business, and it is necessary if appropriate or helpful for such a business. See
Deputy v. du Pont, 308 U.S. 488, 495 (1940); see also Lingren v. Commissioner,
T.C. Memo. 2016-213, 112 T.C.M. (CCH) 569 (2016).
Section 274(d) imposes strict substantiation requirements for deductions
claimed for travel, meals, entertainment, and vehicle expenses. No such deduction
is allowed unless the taxpayer substantiates, by adequate records or by sufficient
evidence corroborating his own statements, the amount, time and place, and
business purpose for each expenditure. Sec. 274(d); sec. 1.274-5T(a), (b), and (c), - 12 -
[*12] Temporary Income Tax Regs., 50 Fed. Reg. 46014-46016 (Nov. 6, 1985).
Adequate records for this purpose require the taxpayer to maintain an account
book, log, or similar record and documentary evidence that together are sufficient
to establish each element of the expenditure. Id. para. (c)(2)(i), 50 Fed. Reg.
46017. In order to be adequate, records must be prepared or maintained in such a
manner that each recording of an element or expenditure is made at or near the
time of the expenditure or use. Id. subdiv. (ii). While a contemporaneous log is
not required to substantiate the deduction, a taxpayer’s subsequent reconstruction
of his or her expenses does require corroborative evidence with a high degree of
probative value to support such a reconstruction, in order to elevate that
reconstruction to the same level of credibility as a contemporaneous record. Id.
subpara. (1), 50 Fed. Reg. 46016.
To be deductible, travel expenses must be ordinary and necessary, have
been incurred while the taxpayer was away from home, and have been incurred in
the pursuit of a trade or business.8 Liljeberg v. Commissioner, 148 T.C. 83, 92-93
(2017), aff’d, 907 F.3d 623 (D.C. Cir. 2018). Travel expenses that are lavish or
8 At trial respondent focused on resolving the issue of petitioner’s tax home. Because we find that petitioner has not met the substantiation requirements under sec. 274 with respect to any of the travel expenses at issue, we need not address the issue of petitioner’s tax home. - 13 -
[*13] extravagant under the circumstances are not deductible. Sec. 162(a)(2); see
Rundlett v. Commissioner, T.C. Memo. 2011-229, 102 T.C.M. (CCH) 307 (2011).
If travel is for both business and personal purposes, the taxpayer has the burden to
prove the primary purpose of the travel. Johnson v. Commissioner, T.C. Memo.
1982-517, 44 T.C.M. (CCH) 1076 (1982), aff’d, 729 F.2d 1447 (3d Cir. 1984).
The primary purpose of travel is a question of fact, which places importance on the
time spent on each type of activity. Id.
For a variety of reasons we do not find petitioner’s travel log and testimony
credible. Petitioner misapprehends the burden for claiming business deductions in
connection with his travel expenses. He appears to believe that he is entitled to
such deductions so long as he asserts that his travel expenses were motivated by
business purposes. He did not prepare or produce contemporaneous documents to
support his assertion that his travel expenses were for business purposes. Rather,
his documentary evidence consists of travel logs he created after he received
notification of examination and thus fails the “adequate records” test under section
274(d). Neither petitioner’s travel logs nor his testimony convinces the Court that
his expenses were ordinary or necessary or incurred in the pursuit of a trade or
business. With respect to petitioner’s travel between California and New York, in
particular, he provided no evidence to establish the business purposes for these - 14 -
[*14] trips, and there is no way to distinguish whether any trip was made primarily
for a business purpose or a personal one, e.g., to visit his son. Accordingly,
because petitioner did not meet the strict substantiation requirements under section
274(d), we will sustain respondent’s determination that his travel expenses are not
deductible.
Personal meal expenses are generally not deductible, unless they are
ordinary and necessary and constitute traveling expenses under section 162. Sec.
1.262-1(b)(5), Income Tax Regs. These expenses are subject to the strict
substantiation requirements of section 274(d). See Sanford v. Commissioner, 50
T.C. 823, 827 (1968), aff’d per curiam, 412 F.2d 201 (2d Cir. 1969); sec.
1.274-5T(a), Temporary Income Tax Regs., supra. As with his travel expenses,
petitioner misapprehends the burden for claiming business deductions in
connection with his meal expenses. Petitioner appears to believe that he is entitled
to such deductions so long as he asserts that his expenses were motivated by
business purposes. Petitioner did not convince the Court that his meal expenses
were for business purposes rather than personal ones. Accordingly, because
petitioner did not meet the strict substantiation requirements under section 274(d),
we will sustain respondent’s determination that his meal expenses are not
deductible. - 15 -
[*15] III. Bad Debt Losses
Section 166(a)(1) provides that, for any business or nonbusiness debt,
“[t]here shall be allowed as a deduction any debt which becomes [wholly]
worthless within the taxable year.” To give rise to a deduction under section
166(a)(1), a debt must have become wholly worthless during the tax year at issue.
Sec. 1.166-3(b), Income Tax Regs. Worthlessness is a question of fact based on
all the relevant circumstances, which considers, among other things, the debtor’s
financial condition and the value of any security. Sec. 1.166-2(a), Income Tax
Regs. A debt is not worthless to the extent the collateral securing the debt has
value. Black v. Commissioner, 52 T.C. 147 (1969). No deduction is allowed to a
taxpayer who makes no requests for payment and makes no attempts to collect the
debt or to ascertain its worthlessness. Ellisberg v. Commissioner, 9 T.C. 463
(1947). The parties treated the loans to Sterling and SUDA as business debts.
A. Sterling
Petitioner has not established that any amount of the debt was worthless in
2014. See sec. 1.166-3(a)(2)(iii), Income Tax Regs. He did not provide
documentary evidence or testimony pointing to specific, identifiable events that
caused him to believe the consolidated Sterling loans were uncollectible or
became worthless in 2014. See Crown v. Commissioner, 77 T.C. 582, 598 (1981); - 16 -
[*16] Flood v. Commissioner, T.C. Memo. 2001-39; sec. 1.166-2(a), Income Tax
Regs. He did not attempt collection or contact Sterling during 2014 regarding any
concern about repayment, and he never brought suit to collect on the note from
Sterling. He lacked specific knowledge about the value of Sterling’s assets or
liabilities. Accordingly, we will sustain respondent’s determination to disallow
these losses.
B. SUDA
Petitioner made no collection efforts on the loans in 2014 and began
collection efforts in February 2015 after the loans became due. He did not submit
information with his return establishing the loans were worthless in 2014. He
provided no documentary evidence or detailed testimony explaining what led him
to believe the loans were worthless. See Crown v. Commissioner, 77 T.C. at 598;
Flood v. Commissioner, T.C. Memo. 2001-39; sec. 1.166-2(a), Income Tax Regs.
He testified that, when he made the loans in August 2014, he believed the value of
the collateral was more than the value of the loan proceeds and provided no
evidence that the collateral lost its value in the final four months of 2014. He
never exercised the option to convert the debt into equity or otherwise received an
equity interest in the development project or SUDA. He did not meet his burden - 17 -
[*17] of persuading this Court that the loans were worthless in 2014.
Accordingly, we will sustain respondent’s decision to disallow the loss.
IV. Loss of Software
Losses sustained during the tax year that are not compensated by insurance
or otherwise are deductible subject to applicable limitations. See sec. 165(a); sec.
1.165-1(a), Income Tax Regs. The allowance of losses for the permanent
withdrawal of depreciable property from use in a trade or business or in the
production of income are governed by regulations covering the applicable
depreciation method. See secs. 1.165-2(c), 1.167(a)-8, Income Tax Regs.
Computer software which is readily available for purchase by the general
public or not acquired in connection with the acquisition of a trade or business
may be depreciable under section 167(a). Sec. 167(f)(1)(A); sec. 1.197-2(c)(4),
Income Tax Regs. In general, computer software that is depreciable under section
167(a) must be depreciated using the straight-line method and a useful life of 36
months. Sec. 167(f)(1)(A); sec. 1.167(a)-14(b), Income Tax Regs. Where an asset
is permanently retired from use in the trade or business or in the production of
income but is not disposed of by the taxpayer or physically abandoned, recognized
loss will be measured by the excess of the adjusted basis of the asset at the time of - 18 -
[*18] retirement over the estimated salvage value or over the fair market value of
the property at retirement. Sec. 1.167(a)-8(a)(3), Income Tax Regs.
Petitioner did not offer documentary evidence or testimony supporting his
reported cost basis of $6,990. Further, we did not find his testimony credible
concerning his reported basis in the software at the time of retirement or
depreciation deductions taken on the software before its retirement. Ultimately,
petitioner did not carry his burden to prove both his initial cost basis in the
software and his adjusted basis as of the time of loss. Accordingly, we will sustain
respondent’s decision to disallow any deduction for the loss.
V. Abandoned Timeshare
An ordinary loss deduction for the loss of usefulness or obsolescence of
nondepreciable property is allowed for the year the loss is actually sustained if
(1) the loss is incurred in a business or a transaction entered for profit; (2) the loss
arises from the sudden termination of usefulness in the business or transaction;
and (3) the property is permanently discarded from use, or the business or
transaction is discontinued. Sec. 1.165-2(a), Income Tax Regs. Where a
depreciable asset used in a trade or business or held for the production of income
is retired by actual physical abandonment, a loss will be recognized if the taxpayer
intends to discard the asset irrevocably so that it will neither be used again by the - 19 -
[*19] taxpayer nor retrieved by the taxpayer for sale, exchange, or other
disposition. Sec. 1.167(a)-8(a)(4), Income Tax Regs.
Petitioner did not establish that he used the timeshare in his trade or
business or that it was held for the production of income. Further, he put forward
no evidence from which this Court can determine whether the property was
abandoned in 2014. Accordingly, we will sustain respondent’s determination to
disallow petitioner’s claimed loss on the timeshare.
VI. Section 6651 Addition to Tax
Respondent determined that petitioner is liable for an addition to tax under
section 6651(a)(1) for failure to file his 2014 Federal income tax return timely.
Section 6651(a)(1) authorizes the imposition of an addition to tax for failure to file
a return timely unless it is shown that such failure was due to reasonable cause and
not due to willful neglect. See United States v. Boyle, 469 U.S. 241, 245 (1985).
A failure to file a Federal income tax return timely is due to reasonable cause if the
taxpayer exercised ordinary business care and prudence but nevertheless was
unable to file the return within the prescribed time, typically for reasons outside
the taxpayer’s control. See McMahan v. Commissioner, 114 F.3d 366, 368-369
(2d Cir. 1997), aff’g T.C. Memo. 1995-547; sec. 301.6651-1(c)(1), Proced. &
Admin. Regs. It is well established that the filing of an unsigned return form is - 20 -
[*20] not the filing of a valid return. See Elliott v. Commissioner, 113 T.C. 125,
128 (1999); see also Mohamed v. Commissioner, T.C. Memo 2013-255, at *11-
*12.
With an extension, petitioner’s 2014 Federal income tax return was due on
October 15, 2015. Respondent’s records reflect that respondent received
petitioner’s return on December 14, 2015, nearly two months after the due date for
filing. Petitioner testified that he filed his return before October 15, 2015, and that
respondent rejected the return because it was not signed, which accounted for the
delay. However, he also acknowledged submitting the return several times and
provided testimony acknowledging he submitted his 2014 return with a signature
date of February 29, 2016. He did not claim or argue a mistake or error in dating
the return February 29, 2016. He failed to introduce any credible evidence
showing that he had reasonable cause for filing his 2014 return late. Respondent
has carried his burden of production under section 7491(c). Accordingly, we will
sustain respondent’s imposition of the addition to tax under section 6651(a)(1)
for 2014.
VII. Section 6662(a) Penalty
Section 6662(a) and (b)(1) and (2) imposes a 20% accuracy-related penalty
on any underpayment of Federal income tax which is attributable to “negligence” - 21 -
[*21] or “disregard” of rules or regulations or a substantial understatement of
income tax. Section 6662(c) defines “negligence” as including any failure to make
a reasonable attempt to comply with the provisions of the Code and defines
“disregard” as any careless, reckless, or intentional disregard. See sec.
1.6662-3(b)(1) and (2), Income Tax Regs. An understatement of income tax is
substantial if it exceeds the greater of 10% of the tax required to be shown on the
return or $5,000. Sec. 6662(d)(1)(A).
To satisfy respondent’s burden of production under section 7491(c),
respondent must produce evidence showing, inter alia, that his representatives
complied with section 6751(b)(1). See Graev v. Commissioner, 149 T.C. 485
(2017), supplementing and overruling in part 147 T.C. 460 (2016). The record
contains a timely civil penalty approval form that shows that respondent’s
representatives complied with section 6751(b)(1). Respondent has met the burden
of production in this case, and it is petitioner’s burden to establish that the
imposition of the penalty is not appropriate. See Higbee v. Commissioner, 116
T.C. 438, 447 (2001).
Section 6664(c)(1) provides an exception to the section 6662(a) penalty if it
is shown that there was reasonable cause for any portion of the underpayment and
the taxpayer acted in good faith. The determination of whether a taxpayer acted - 22 -
[*22] with reasonable cause and in good faith is made on a case-by-case basis,
taking into account all the pertinent facts and circumstances. Sec. 1.6664-4(b)(1),
Income Tax Regs. Petitioner did not make any arguments at trial regarding the
applicability of the reasonable cause exception. In addition, the record does not
show that the reasonable cause exception applies to this case. Therefore, we will
sustain respondent’s determination that petitioner is liable for the accuracy-related
penalty for the year at issue.
We have considered all of the arguments made by the parties and, to the
extent they are not addressed herein, we find them to be moot, irrelevant, or
without merit.
To reflect the foregoing,
Decision will be entered for
respondent.