- 9 -
OPINION
Except for respondent's allegations of fraud, petitioners
must prove that respondent's determinations set forth in her
notices of deficiency are incorrect.5 Rule 142(a) and (b); Welch
v. Helvering, 290 U.S. 111, 115 (1933). Petitioners must also
prove their entitlement to any deduction. New Colonial Ice Co.
v. Helvering, 292 U.S. 435, 440 (1934). Deductions are matters
of legislative grace, and petitioners must show that their
deductions are allowed by the Code. Petitioners must also keep
sufficient records to substantiate any deduction that would
otherwise be allowed by the Code. Sec. 6001.
1. Profit on Sales
Petitioners do not dispute that Hamalee failed to report the
sales set forth in the notices of deficiency. The dispute rests
on the calculation of Hamalee's gross profit percentage
5 Petitioners allege in their brief that respondent must
prove her determination of constructive distributions because
this determination is arbitrary and capricious. We refuse to
consider this allegation because petitioners raised it for the
first time on brief. If petitioners had wanted to place this
allegation before us, they should have made the allegation in
their petition or taken other steps to preserve it. By failing
to do so, petitioners have conceded it. See, e.g., Merlino v.
Commissioner, T.C. Memo. 1993-200, and the cases cited therein;
see also Rule 34(b)(4) and (5).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011