TAX COURT OPINION

Case: Linda Blair
Docket Number: 12917-07S
Judge: Colvin
Opinion Type: bench
Filed: 01/06/2009
Pages: 20

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 LINDA BLAIR, Petitioner v . Docket No . 12917-07S . COMMISSIONER OF INTERNAL REVENUE, Respondent S TIiT . S .T . JUDGE O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice an d Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial of the above ca e before Special Trial Judge Robert N . Armen, Jr . at Chicago, llinois, on December 10, 2008, containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findin s of fact and opinion, a Decision will be entered under Rule 155 , (Signed) Robert N. Armen, Jr. Special Trial Judg e Dated : Washington, D .C . January 6, 2009 SERVED JAN 0 7 2009 3 1 Bench Opinion by Special Trial Jude Robert N . Armen Jr . 2 December 10, 200 8 3 Linda Blair v . Commissioner Docket No . 12917-07S 4 I . 5 THE COURT : THE COURT HA DECIDED TO RENDER ORA L 6 FINDINGS OF FACT AND OPINION IN THIS CASE , AND THE FOLLOWING 7 REPRESENTS THE COURT ' S ORAL FINDINGS OF FACT AND OPINION . 8 THE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED 9 UPON AS PRECEDENT IN ANY OTHER CASE . 10 II . 11 This proceeding was hear as a Small Tax Cas e 12 pursuant to the provisions of section 7463 of the Internal 13 Revenue Code of 1986, as amended, and Rules 170 through 175 14 of the Tax Court Rules of Practice and Procedure . 15 III . 16 This bench opinion is made pursuant to th e 17 authority granted by section 7459 ( b) of the Internal Revenue 18 Code of 1986, as amended , and Rule 152 of the Tax Cour t 19 Rules of Practice and Procedure . 2 0 21 Hereinafter in this bench opinion, and unless otherwise indicated, all section numbers refer to th e 22 Internal Revenue Code, as amended and in effect for 2004 , 23 the taxable year in issue, and all Rule numbers refer to th e 24 Tax Court Rules of Practice and Pro'cedure . 25 Heritage Reporting Corporation (202) 628-4888 1 IV . 2 Linda Blair appeared on er own behalf . Thomas D . 4 3 Yang appeared on behalf of Respondent . 4 V . 5 For the taxable year 200 , Respondent determined a 6 deficiency in Petitioner ' s Federal income tax in the amount 7 of $18 , 169 and an accuracy - relatedipenalty under sectio n 8 6662 ( a) in the amount of $3,633 .P v 9 VI . r* 10 Respondent concedes that Petitioner is entitled to 11 the dependency exemption deduction that was disallowed i n 12 the Notice of Deficiency . Responde it makes certain other 13 concessions that will be described as we go along . 14 After Respondent ' s conces s ions, the issues for 15 decision are as follows : 16 (1) Whether Petitioner is entitled to head- 17 of-household filing status ( as claimed on her 18 return) or married - filing-sepa ately status (as 19 determined in the Notice of De iciency) . This 20 issue turns on whether Petitioner was married o r 21 is treated as unmarried by vir ue of section 22 7703(b) . We hold that Petitio er, although 23 legally married at the end of 004, is treate d 24 as unmarried by virtue of section 7703(b) and 25 that, as a consequence, she is 'entitled to head- Heritage Reporting Corporation (202) 628-4888 5 1 of-household filing status for 2004 . 2 (2) Whether Petitioner received unreported 3 income of $23,831 .47 as determined in the Notic e 4 of Deficiency . We hold that s e received unreported 5 income of $21,420 . 6 (3) Whether Petitioner is liable for self- 7 employment tax on and is entit ed to a correlative 8 deduction under section 164(f) in respect of th e 9 unreported income . We hold that she is so liabl e 10 and entitled . 11 (4) Whether Petitioner is',entitled to Schedule 12 A itemized deductions of $16,1153 as claimed o n 13 her return . We hold that she 'Iis entitled to 14 deductions of $9,734 . 15 (5) Whether Petitioner is',entitled t o 16 Schedule E rental expense deductions in the amount 17 of $21,855 . We hold that she 'is entitled t o 18 deductions of $8,317 . 19 (6) Whether Petitioner isj liable for the 20 accuracy-related penalty under section 6662(a) . 21 We hold that she is . 22 Adjustments to the earned income credit, 23 the child tax credit, and the 1, additional chil d 24 tax credit are purely mechanical matters, th e 25 resolution of which is dependeInt on our disposition Heritage Reporting Corporatio n (202) 628-4888 6 1 2 3 of various of the enumerated ssues . VII . None of the facts have b en stipulated . Most of 4 the facts are found from Respondent 's Requests fo r 5 Admission, to which Petitioner fail ed to respond, see Rul e 6 90, and from the matters deemed st' pulated pursuant to our 7 Order making absolute our show ca u e order issued in 8 response to Respondent's Rule 91(f) motion . 9 Petitioner resided in th State of Illinois at the 10 time that the petition was filed wi J th the Court . 11 During 2004, the taxabl e year in issue, Petitioner 12 held an interest in residential re 1 property located i n 13 Chicago, Illinois . The property w s a "two-flat" style 14 structure, composed of at least tw o separate living units . 15 During 2004, Petitioner received rental income of $21,600 16 with respect to her interest in this property . 17 Also during 2004, Petitioner was involved in rea l 18 estate brokerage activities, namely finding prospectiv e 19 clients on behalf of various realto~s . In 2004, Petitione r 20 received compensation from such rea~tors for service s 21 rendered . 22 During 2004, Petitioner paid mortgage interest in 23 the total amount of $12,634 . Half of this amount, o r 24 $6,317, was allocable to Petitioners rental property ; the 25 other half was allocable to Petitioer's personal dwelling Heritage Reporting Corporatio n (202) 628-4868 7 1 unit . 2 During 2004, Petitioner paid commissions and fees 3 and repairs and maintenance in respect of her renta l 4 property . 5 During 2004, Petitioner de contributions to New 6 Life, a charitable organization, i the total amount o f 7 $3,064 . 8 Petitioner married in 1982, and she remain s 9 married to the same man to this day . However, Petitioner's 10 husband left the marital home late in 2003 or early in 2004 11 and lived separate and apart from etitioner until sometime 12 in 2006, when the couple reconcile . 13 Petitioner has a son, who was born in 1985, and a 14 daughter, who was born five years thereafter . The son and 15 daughter lived with Petitioner throughout 2004 . 16 Petitioner timely filed an income tax return for 17 2004 . On her return, Petitioner reported her filing status 18 as head-of-household, and she claimed dependency exemption 19 deductions for her son and daughter . Petitioner reporte d 20 zero tax liability, claimed two refundable credits, namely, 21 an earned income credit of $4,300 and additionally a chil d 22 tax credit of $344 and requested al refund equal to thei r 23 sum, or $4,644 . 24 Petitioner attached to her return a Schedule A 25 ("Itemized Deductions ") . On the Sckhedule A, Petitione r Heritage Reporting corporation (202) 628-4888 8 1 claimed deductions for (1) medical and dental expenses in 2 the gross amount of $10,000 and the net amount (after the 3 7 .5 percent threshold) of $8,977 ; 2) taxes paid of $353 ; 4 and (3) charitable contributions of $6,823, for total 5 itemized deductions of $16,153 . (Re garding charitable 6 contributions, we note parenthetic lly that Petitione r 7 actually claimed $8,000 in gifts by cash or check on line 15 8 of her Schedule A but only actually deducted $6,823 , 9 apparently because of the 50 perc e t limitation on the 10 amount of charitable contributions to most charitable 11 organizations . See sec . 170(b)(1) ( A) . ) 12 Petitioner also attached to her return a Schedul e 13 C ("Profit or Loss from Business ") .I, On the Schedule C , 14 Petitioner reported her principal business or profession as 15 "rental property" . Petitioner them reported gross income o f 16 $21,600, and she claimed total expenses of $21,855 , 17 consisting of commissions and fees of $4,200, mortgag e 18 interest of $15,480, and repairs and maintenance of $2,175 . 19 The resulting net loss of $255 waslthen carried to paid one 20 of her Form 1040 and set off against her other income (wages 21 and interest) . 22 Petitioner did not prepare her own return . 23 Rather, she had it prepared by a professional retur n 24 preparer at Liberty Tax Service in Chicago . 25 In or about November 2006, Petitioner submitted t o Heritage Reporting Corporation (202) 628-4888 1 Respondent an amended income tax return (Form 1040X), making 2 three changes to her original return . 3 First, Petitioner eliminated the Schedule from k 0 9 4 the amended return, instead adding a Schedule E 5 ("Supplemental Income and Loss") ; wever, none of the 6 deductions nor any of the numbers c anged . 7 Second, Petitioner elimin ted the Schedule A, 8 claiming instead the standard deduction in the amount 9 consistent with head-of-household fling status . 10 Third, Petitioner claimed la modest increase in the 11 additional child tax credit because, of the $255 increase in 12 her earned income due to the elimination of the Schedule C 13 net loss (claimed instead as a $255 rental loss on Schedule 14 E) . 15 Petitioner did not prepare the amended return . 16 Rather, she had it prepared by a professional preparer a t 17 Liberty Tax Service . 18 Petitioner's amended return, which appears to hav e 19 been submitted during the later sta es of the audit, was no t 20 accepted or processed by Respondent 21 In March 2007, Respondent sent Petitioner a Notice 22 of Deficiency determining the deficiency and accuracy- 23 related penalty at issue in the present case . 24 In the Notice of Deficiency, Respondent disallowe d 25 one of the dependency exemption deductions claimed by Heritage Reporting Corporatio n (202) 628-4888 10 1 Petitioner and chan ged Petitioner ' filing status from head- 2 of-household to married - filing - sep rately . Further , 3 Respondent disallowed for lack of substantiation the 4 deductions claimed for commissions and fees, mortgag e 5 interest , and repairs and maintenance . Respondent also 6 disallowed , again for lack of subs antiation , Schedule A 7 deductions claimed for medical and dental expenses and 8 charitable contributions . Respond nt did not expressly 9 disallow the Schedule A deductio n or taxes paid ; however , 10 because of its modest amount ($353) Respondent allowe d 11 instead the standard deduction (in an amount consistent with 12 the filing status of married - filing -separately) because i t 13 was more advantageous to Petitione r 14 In addition to the foregoing, Responden t 15 determined, pursuant to a bank depoits analysis, tha t 16 Petitioner had unreported income of $23,831 .47 . Respondent 17 further determined that Petitioner Was liable for self- 18 employment tax on this income and that she was entitled to a 19 correlative deduction under section 164(f) for one-half of 20 such tax . 21 Finally, as purely mechanical matters, Respondent 22 disallowed the earned income creditlof $4,300 and th e 23 additional child tax credit of $344but allowed a child tax 24 credit of $900 . 25 At trial, Respondent conceded the dependency Heritage Reporting Corporatio n (202) 628-4888 1 1 1 exemption deduction that had been d sallowed in the Notice 2 of Deficiency . Respondent also con eded that in 200 4 3 Petitioner paid mortgage interest i the total amount of 4 $12,634 and that she made contribut ons to New Life, a 5 charitable organization within the eaning of section 6 170(c), in the amount of $3,064 . F rther, Responden t 7 conceded a small portion of the amo nt of unreported income 8 that had been determined in the Not ce of Deficiency , 9 acknowledging that unreported income amounted to $21,420 10 rather than $23,831 .47 . Finally, Respondent conceded tha t 11 gross income of $21,600 reported by Petitioner on her 12 Schedule C was properly reportable as gross rents on 13 Schedule E . 14 VIII . 15 We turn now to the issues before us . We begi n 16 with Petitioner's filing status . 17 Respondent does not dispute Petitioner's filin g 18 status as head-of-household other than on the basis that 19 Petitioner was legally married as Of the close of th e 20 taxable year in issue . In general,! head-of-household filing 21 status is not available to a taxpayer who is married . Sec . 22 2 (b) . 23 A taxpayer's marital status is determined unde r 24 section 7703 . As relevant herein, section 7703(a)(1 ) 25 provides that the determination wh ther an individual is Heritage Reporting corporatio n (202) 628-4888 1 2 1 married shall be made as of the close of the individual' s 2 taxable year . In the present case, Petitioner was, in fact, 3 married as of December 31, 2004 . hat being the case, i t 4 would appear at first blush that P titioner would not 5 qualify for head-of-household fili g status . 6 However, insofar as head of-household filing 7 status is concerned, section 2(c) rovides that a n 8 individual shall be treated as not married at the close of 9 the taxable year if the individual is so treated under the 10 provisions of section 7703(b) . 11 Section 7703(b) provides that certain married 12 individuals who live apart will note be considered a s 13 married . The only requirement of t at section tha t 14 Respondent appears to seriously dispute is whether during 15 the last six months of 2004 Petitio er's spouse was not a 16 member of Petitioner's household . owever, based o n 17 Petitioner's testimony, which we found credible in this 18 regard, we have found as a fact that Petitioner's husband 19 left the marital home late in 2003 pr early in 2004 an d 20 lived separate and apart from Petitioner until sometime in 21 2006, when the couple reconciled . 22 In view of the foregoing, ', Petitioner is considere d 23 not to be married in 2004 . We therefore hold that she is 24 entitled to head-of-household filinll' status for that year . 25 Respondent's determination to the c ntrary is not sustained . Heritage Reporting Corporation (202) 628-488 1 2 IX . 1 3 Before turning to the remaining substantive issue s 3 in this case, we should first identify several fundamental 4 principles that inform our disposition of those issues . 5 First, as a general rule, the Commissioner' s 6 determinations are presumed correct, and the taxpayer bears 7 the burden of proving that those determinations ar e 8 erroneous . Rule 142(a) . This principle was firml y 9 established by the United States Supreme Court as early as 10 1933 and has been reaffirmed by thel supreme court a s 11 recently as 1992 . See INDOPCO, In II . v . Commissioner, 503 12 U .S . 79, 84 (1992) ; Welch v . Helve in , 290 U .S . 111, 11 5 13 (1933) . 14 Although section 7491(a) may serve to shift th e 15 burden of proof to the Commissioner, that section has n o 16 application to the present case in view of the fact that (1) 17 Petitioner has not asserted its ap licability ; (2 ) 18 Petitioner has failed to demonstrat e that she satisfied the 19 conditions precedent for the appli ability of that section, 20 see sec . 7491(a)(2) ; and (3) Petit oner failed to introduce 21 credible evidence sufficient to es ablish a prima faci e 22 case, see sec . 7491(a)(1) . 23 Second, deductions are almatter of legislative 24 grace, and the taxpayer bears the 9urden of proving that he 25 or she is entitled to any deductio claimed . Rule 142(a) ; Heritage Reporting Corporation (202) 628-4888 1 4 1 2 3 Deputy v . du Pont , 308 U .S . 488, 4 3 (1940) ; New Colonia l Ice Company v . Helvering , 292 U .S . 435, 440 (1934) ; Welch v . Helvering , su ra . This includes the burden o f 4 substantiation . Hradesky v . Commissioner, 65 T .C . 87, 90 5 (1975), affd . per curiam 540 F .2d ,91 (5th Cir . 1976) . 6 Third, section 6001 and he regulation s 7 promulgated thereunder require tax ayers to maintain records 8 sufficient to permit verification f income and expenses . 9 See sec . 1 .6001-1(a) and (e), Inco e Tax Regs . As a general 10 rule, if, in the absence of such r cords, a taxpaye r 11 provides sufficient evidence that the taxpayer has incurred 12 a deductible expense, but the taxpayer is unable t o 13 adequately substantiate the amount of the deduction to whic h 14 he or she is otherwise entitled, the Court may estimate the 15 amount of such expense and allow the deduction to tha t 16 extent . Cohan v . Commissioner , 39 .2d 540, 543-544 (2 d 17 Cir . 1930) . In so doing, the Court may bear heavily against 18 the taxpayer whose inexactitude is f his or her own making 19 because of the failure to keep comp ete and accurat e 20 records . See id . 21 Fourth, the Commissioner ay use the bank deposits 22 method to reconstruct a taxpayer's ~ncome . See Estate o f 23 Mason v . Commissioner , 64 T .C . 651, 656 (1975), affd . 566 24 F .2d 2 (6th Cir . 1977) . A bank dep~sit is prima faci e 25 evidence of income and the Commissioner need not prove a Heritage Reporting Corporation (202) 628-4868 15 1 likely source of that income . Toka ski v . Commissioner, 8 7 2 T .C . 74, 77 (1986) . The bank deposits method assumes tha t 3 all of the money deposited into the taxpayer's accounts i s 4 includable in gross income unless the taxpayer shows tha t 5 deposits are not taxable . DiLeo v Commissioner , 96 T .C . 6 858, 868 (1991), affd . 959 F .2d 16 (2nd Cir . 1992) . 7 However, the Commissioner must take into account nontaxable 8 items, redeposits, and the like of which the Commissione r 9 has knowledge, but the method is nollt invalidated even if the 10 Commissioner's calculations are not completely correct . Id . 11 The taxpayer then bears the burden of proving that th e 12 Commissioner's analysis is incorrect, e .g ., that income wa s 13 from a nontaxable source or otherwi se excluded from th e 14 taxpayer's gross income by law . See, e .g ., Mantakounis v . 15 Commissioner , T .C . Memo . 2002-306 . 16 X . 17 With the foregoing principles firmly in mind, w e 18 can quickly dispose of the remaining substantive issues in 19 this case . 20 Petitioner is entitled to Schedule A itemize d 21 deductions of $9,734 . This amountlconsists of taxes paid of 22 $353, which Respondent never questioned, charitabl e 23 contributions to New Life of $3,064,, which Responden t 24 conceded at trial, and mortgage interest paid in respect of 25 Petitioner ' s personal dwelling uni of $6,317 , representing Heritage Reporting Corporatio n (202) 628-4888 1 6 1 one-half of the total mortgage interest paid for the year . 2 Petitioner did not prove that she s entitled to any greate r 3 deduction . Further, although Petitioner incurred medica l 4 expenses in 2004, she did not prove that she paid an amount 5 greater than 7 .5 percent of her adjusted gross income . 6 Accordingly, she is not entitled t any deduction for 7 medical or dental expenses . 8 Because Petitioner is en itled to itemize d 9 deductions in excess of $7,150, sh is not entitled to the 10 standard deduction . 11 Petitioner is entitled toi,a Schedule E deductio n 12 for rental expense in the amount ofl$6,317, representing the 13 other half of the total mortgage interest paid by her fo r 14 the year . Petitioner is also entitled to deductions for 15 commissions and fees and repairs and maintenance in a n 16 amount that we estimate to be $2,500 . See Cohan v . 17 Commission , su ra . Petitioner di d of prove that she i s 18 entitled to any greater deduction . 19 Based on scores of pages of Petitioner's bank 20 -depes- t ;we find that Respondent's' bank deposits analysi s 21 was reasonable, taking into account as it did total deposits 22 to Petitioner's accounts, reduced b (1) deposits o f 23 Petitioner's grandmother's Social S curity checks ; (2) 24 transfers between accounts ; (3) the direct deposit of 25 Petitioner's payroll checks ; and (4 gross rents . Thus, i t Heritage Reporting Corporation (202) 628-4888 17 1 was Petitioner's burden to prove th .t the deposit s 2 identified by the Commissioner as ureported income wer e 3 not, in fact, unreported income . S e DiLeo v . Commissioner , 4 supra at 869 (the taxpayer, not the Commissioner, bears the 5 burden of proving that the Commissi ner's determination of 6 unreported income, computed using t e bank deposits method 7 of reconstructing income, is incorr ct) ; Kling v . 8 Commissioner , T .C . Memo . 2001-78 (same) . But the Petitione r 9 did not prove that any reduction i n excess of the amoun t 10 conceded by Respondent at trial was warranted . Accordingly , 11 we are constrained to hold that Petitioner received 12 unreported income of $21,420 in 2001114 13 We also hold, based in part on the fact tha t 14 Petitioner was involved in real estate activities in 200 4 15 and based in part on her failure to prove otherwise, tha t 16 Petitioner's unreported income is sEubject to self-employment 17 tax in 2004 . That being the case, ,Petitioner is entitled t o 18 a deduction equal to one-half of sujch tax . See sec . 164(f) . 19 XI . 20 Finally, we turn to the ccuracy-related penalty 21 under section 6662(a) . 22 With respect to a taxpayer's liability for any 23 penalty, section 7491(c) places onlthe Commissioner th e 24 burden of production, thereby requiring the Commissioner to 25 come forward with sufficient evidence indicating that it i s Heritage Reporting Corporation (202) 628-48'88 1 8 1 appropriate to impose the penalty .) See Higbee v . 2 Commissioner , 116 T .C . 438, 446-44 (2001) . Once th e 3 Commissioner meets his burden of p oduction, the taxpaye r 4 must come forward with persuasive evidence that the 5 Commissioner's determination is incorrect . See id . at 447 ; 6 see also Rule 142(a) ; Welch v . Hel erin , 290 U .S . 111, 115 7 (1933) . 8 Section 6662(a) imposes penalty equal to 2 0 9 percent of the amount of any under ayment attributable to 10 either negligence or disregard of ~ules or regulations or a 11 substantial understatement of inco e tax . Sec . 6662(b)(1), 12 (2) . 13 The term "negligence" includes any failure to make 14 a reasonable attempt to comply with the provisions of the 15 Internal Revenue laws, and the term "disregard" includes any 16 careless, reckless or intentional disregard . Sec . 6662(c) . 17 An understatement is the mount by which th e 18 correct tax exceeds the tax reporte on the return . Sec . 19 6662(d) . The understatement is sub' stantial if it exceed s 20 the greater of $5,000 or 10 percent of the tax required t o 21 be shown on the return . Sec . 6662 (cl) (1) (A) (i) and (ii) . 22 Section 6664(c)(1) provids that no penalty shall e 23 be imposed if the taxpayer demonstrates that there was a 24 reasonable cause for the underpayment and the taxpayer acted 25 in good faith . The determination of whether a taxpaye r Heritage Reporting Corporation (202) 628-4888 19 1 acted with reasonable cause and inlgood faith depends on the 2 facts and circumstances of the sit ation and includes an 3 "honest misunderstanding of fact o law" . Sec . 1 .6664- 4 4(b)(1), (c), Income Tax Regs . 5 We hold that Respondent atisfied his burden of 6 production under section 7491 ( c) b cause Petitioner , 7 notwithstanding Respondent ' s conce si ns and our holdings, 8 appears to have understated her in omeby both $5,000 an d o A 9 more than 10 percent . See McCammo v . Commissioner, T .C . 10 Memo . 2008 - 114 . But even if she d ' d not, understatement of 11 income or overstatement of deducti ns often reflects th e 12 inadequacy of the taxpayer ' s recor s, which is in itself a 13 basis for imposing the penalty . A]berico v . Commissioner , 14 T .C . Memo . 1995-542 ; see Healey v .~Commissioner , T .C . Memo . 15 1996-260 . 16 As a defense to the penalty, Petitioner contends 17 that she relied on a professional return preparer at Liberty 18 Tax Service . 19 Reasonable reliance on professional advice ma y 20 serve as a defense , see United Stat§ s v . Boyle , 469 U .S . 21 241, 251 (1985), if, under all the acts and circumstances, 22 such reliance is reasonable and the taxpayer acted in good 23 faith . Sec . 1 .6664-4(b)(1), (c), I come Tax Regs . T o 24 succeed and thereby avoid liability for the accuracy-relate d 25 penalty, a taxpayer must satisfy the following Heritage Reporting Corporation (202) 628-4888 2 0 1 requirements by - sh i i that : (1) The advisor was a 2 competent professional who had suf icient expertise t o 3 justify reliance ; (2) the taxpayerlprovided the necessary 4 and accurate information to the advisor ; and (3) the 5 taxpayer actually relied in good faith on the advisor's 6 judgment . E .g ., Neonatology Associates P .A . v . 7 Commissioner , 115 T .C . 43, 99 (200C), affd . 299 F .3d 221 8 (3rd Cir . 2002) . 9 In the present case, we have no doubt tha t 10 Petitioner relied on Liberty . Likewise, we have no doubt 11 that Petitioner believed that the folks at Liberty wer e 12 competent to prepare her return . We note, parenthetically, 13 that the record does not reveal the professional 14 qualifications of the individual(s) at Liberty who prepared 15 Petitioner's returns .) However, we are unable to conclude , 16 based on the record before us (which record does not includ e 17 testimony from anyone at Liberty) that Petitioner provide d 18 necessary and accurate information to the preparer, give n 19 (inter alia) that a significant amount of income was omitted 20 from the return and significant deductions were claimed for 21 which no substantiation was provide 1 . Further, severa l 22 deductions were claimed in round amounts (e .g ., medical 23 expenses of $10,000, contributions Of $8,000), thereby 24 suggesting that such deductions were based on estimate s 25 rather than actual records . Heritage Reporting Corporation (202) 628-488 1 In conclusion , we hold that Petitioner is liable 2 for the accuracy - related penalty . ( Respondent' s 3 determination is therefore sustained . 2 1 5 In order to give effect to our disposition of the 6 disputed issues , as well as Respon ent ' s concessions , 7 decision will be entered pursuant to Rule 155 . 8 XIII . 9 THIS CONCLUDES THE COURT S ORAL FINDINGS OF FACT 10 AND OPINION IN THIS CASE . 11 (Whereupon , at 9 :35 a . m . the bench opinion in the 12 above - entitled matter was concluded . ) 13 14 15 16 17 18 19 20 / / 21 22 23 2 4 25 Heritage Reporting Corporation (202) 628-4888