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Respondent disallowed $60,509 of the claimed deductions because
petitioners were unable to substantiate the existence and
business purpose of most of the deductions.
Preliminarily, we note that several issues in the dispute
regarding these deductions revolve around petitioners’ inability
to produce the source documents on which their 1999 income tax
return was allegedly based. Petitioners engaged Howard Hertz
(Mr. Hertz) to prepare their 1999 return. Mr. Hertz also
represented petitioners during the subsequent examination of the
1999 return. Dr. Rinker alone assisted Mr. Hertz in preparing
the 1999 return and in gathering documents for the subsequent
examination of that return. Dr. Rinker claimed that she gave the
documents which substantiated many of the figures on petitioners’
1999 tax return to Mr. Hertz after Dr. Rinker, Mr. Hertz, and Dr.
Rinker’s assistant organized the records at Dr. Rinker’s home one
evening in 2002. Dr. Rinker claims that Mr. Hertz then lost the
documents while the examination was being reviewed by
respondent’s Appeals officer. Mr. Hertz testified that he never
left Dr. Rinker’s home with the source documents after their
meeting in 2002. Respondent takes the position that petitioners,
and not Mr. Hertz, lost the records, or that they never
maintained the records to begin with.
As was true in Diaz v. Commissioner, 58 T.C. 560, 564
(1972):
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