- 25 -
Respondent contends that petitioners also have failed to provide
substantiation for the income and deductions claimed in their
returns for those years.
We do not agree with respondent's suggestion that section
481(b)(2) requires a taxpayer to prove the accuracy of every item
affecting its tax liability in the years prior to the year of a
change in accounting method in order to qualify for the
provision's benefits. Rather, a taxpayer need show only what its
taxable income would have been in those years using the new
method of accounting in order to obtain the benefit of that
provision. We, however, do not find that the record contains
sufficient evidence to satisfy the requirements of section
481(b)(2). Although we accept the evidence of the payments into
and disbursements from the BUF accounts in issue afforded by the
surety's ledgers, we do not accept petitioners' tax returns as
proof of the gross receipts of petitioner’s bail bond business
for the years preceding 1988. It is well settled that a tax
return merely represents the claim of the taxpayer and does not
establish the truth of the matters set forth therein. Wilkinson
v. Commissioner, 71 T.C. 633, 639 (1979); Roberts v.
Commissioner, 62 T.C. 834, 837 (1974); Halle v. Commissioner, 7
T.C. 245, 247-248 (1946), affd. 175 F.2d 500 (2d Cir. 1949). We
construe the regulations pursuant to section 481(b)(2), which
provide for the use by a taxpayer of its "books of account and
other records" to establish its taxable income using the new
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011