Ernest L. and Kathleen Newsome - Page 11

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                  Respondent's reconstruction of petitioners' income for each                          
            year in the notice of deficiency is presumed correct and the                               
            burden is on petitioners to demonstrate otherwise.  Rule 142(a);                           
            Mallette Bros. Constr. Co. Inc. v. United States, 695 F.2d 145,                            
            148 (5th Cir. 1983).                                                                       
                  Petitioners contend that the method by which respondent                              
            calculated petitioner's gross receipts is flawed for various                               
            reasons.  They argue that respondent has overestimated gross                               
            receipts because of her failure to take into account: (1) Special                          
            discounts and promotions offered by the Star Telegram; (2) the                             
            time lag in processing each "stop" resulting in extra newspapers                           
            that generated no revenues; and (3) a higher than allowed rate of                          
            uncollectibles due to the nature of petitioner's route.                                    
            Petitioners further argue that respondent's use of only two                                
            subscription rates and assumption that each "average" subscriber                           
            paid for a full monthly subscription artificially inflates the                             
            amount of gross receipts.  Lastly, petitioners generally                                   
            criticize respondent's use of average "draws" arguing that the                             
            "draw" numbers regularly fluctuate and do not lend themselves to                           
            estimates using averages.  In addition, petitioners argue that                             
            their modest lifestyle is in accord with their reported income                             
            and further demonstrates that respondent's determinations must be                          
            erroneous and excessive.                                                                   

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Last modified: May 25, 2011