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(d) The losses of petitioner's subsidiaries for the years
prior to 1989 and 1990 comprise the fourth category of net
operating loss carryforwards. We found claimed losses from two
of these subsidiaries, Controlled Casting Systems Corp. and
National Industrial Management Corp., unreliable and therefore
disregarded them.
As for the subsidiary losses the Court did allow (see supra
p. 16), respondent's position was nevertheless justified based on
the lack of adequate substantiation alone. See Porter v.
Commissioner, T.C. Memo. 1986-465. No records, receipts, or
invoices of the subsidiaries' business transactions were
provided. Virtually the only documentary evidence of the
pertinent loss year expenses of NII's subsidiaries for prior
years is their unaudited books of original entry and general
ledgers, and some canceled checks. Since the records provided by
petitioner were not dispositive, respondent reasonably submitted
the issue to the Court for resolution. See Santa Maria v.
Commissioner, T.C. Memo. 1995-64; Grace Foreign Exch. Corp. v.
Commissioner, T.C. Memo. 1995-63.
(4) Negligence Penalty Based on Resulting Underpayments
We held petitioner liable for accuracy-related penalties for
negligence under section 6662(a) to the extent that the
deductions the Court denied resulted in an underpayment for 1989
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