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McGirl made up the numbers he provided Mr. Lauth to prepare the
Yogurt Station's corporate tax returns. At trial, petitioners
put into evidence check spreads that summarized their business
checking account activity by year.11 Other than for attorney's
fees, petitioners failed to provide any invoices, receipts, or
other documentary evidence to substantiate the claimed increased
deductions. Petitioners testified at trial as to the business
purpose of checks to most payees. We must decide if the check
spreads, coupled with petitioners' testimony, adequately
substantiate the increased expenses.
We note at the outset that petitioners do not wish to
substitute their check spread category totals for all the
deductions claimed on the Yogurt Station's corporate tax returns;
they only want to substitute selected categories. This selective
use of the check spread ignores the expenses on the Yogurt
Station's corporate tax returns that are greater than the check
spread totals. For example, the Yogurt Station's 1989 corporate
tax return has a deduction of $8,478 for taxes; the 1989 check
spread lists total taxes of $6,618.
There are basic problems with the check spreads. Without
receipts, we are left with petitioners' self-serving testimony
11 Respondent made a hearsay objection to petitioners'
introduction of the check spreads into evidence. This objection
was renewed on brief. As a practical matter, when the
substantiation of 3 years of expenses is at issue and copies of
all checks are in evidence, summarizing the check activity does
assist the Court. Fed. R. Evid. 1006. We shall treat these
check spreads prepared by petitioners as admissible evidence.
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