23
Issue 1. Motion To Shift Burden of Proof
Just before trial, corporate petitioners, invoking Rule
142(a), filed a Motion to Shift the Burden of Proof Upon
Respondent with regard to substantiation of the following
categories of disallowed amounts paid by Alondra and Edco: Those
paid as rent to Mr. Munro (discussed infra Issue 2); those paid
to Pertinax under the rubric of Management Services--Other
(discussed infra Issue 4); and those paid to Pertinax under the
rubric of Management Services--Wages (discussed infra Issue 5).
We postponed acting on the motion and left it for disposition as
part of our opinion on the merits.
Petitioners argue and respondent denies that the language of
the deficiency notices implies that the payments now questioned
by respondent were in fact made. As an example, we quote the
language of the notice sent to Alondra on March 8, 1991. With
respect to the rental expenses, this notice states:
It is determined that you incurred rental expense in
the amount of $198,322.00 in lieu of the $225,203.00
reported on your return for the taxable year ended June
30, 1987. The adjustment of $26,881.00, as shown
below, results from the partial disallowance of rental
expenses paid to Joel Munro, * * * claimed on your
return for two properties owned by him * * * because
you have not established that the amounts paid were the
fair market rental values of the properties at the time
of payment, or that the amounts paid were incurred or,
if incurred, paid by you during the taxable year for
ordinary and necessary business purposes or that these
expenses were deductible under the provisions of the
Internal Revenue Code. [Emphasis added.]
With respect to management service fees, the notice states:
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