- 3 -
practice of law. Petitioner also served as a Domestic Relations
Commissioner within a three-county area in Kentucky which meant
he presided over and heard divorce actions (divorce referee).
Petitioner reported self-employment income in 1996 of
$170,980, and claimed deductions of $110,171 attributable to the
law practice, and $27,953 attributable to petitioner’s serving as
a divorce referee. Respondent began examining petitioners’
income tax return for 1996 on May 18, 1999, when respondent sent
petitioners a letter requesting to meet with them to obtain
documentation substantiating petitioners’ income, expenses, and
deductions reported on their tax return for 1996.
Despite numerous requests to provide respondent the
documents to substantiate the deductions, petitioners lacked
adequate books and records. What little documentation
petitioners provided was insufficient to substantiate the
deductions. For example, petitioner provided banking information
and provided the revenue agent a listing of expenses. The
listing lacked dates and check numbers, however, and was merely a
listing of expenses with separate amounts shown under each
expense category.
The revenue agent testified that many of petitioners’ bank
records appeared to be personal expenses that petitioners
deducted for business purposes. For example, petitioner deducted
checks written to his wife for contract labor, but petitioners
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011