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In the notice of deficiency for the taxable years 1978,
1979, and 1981 respondent increased petitioner's cost of goods
sold in the amounts of $145,706, $95,633.60, and $5,862,
respectively. These amounts are related to additional income
from Galion that was included in the notice of deficiency for
these taxable years. Having decided that petitioner's taxable
income should be increased by the amounts from Galion, it follows
that respondent correctly increased petitioner's cost of goods
sold for those years.
B. Commission Expenses
For some of the commission expenses claimed as deductions
for the years 1973 through 1978 petitioner failed to substantiate
the business purpose and that the expenditures were his ordinary
and necessary business expenses. Other than the unidentified
amounts of $170 in 1973 and $16,000 in 1975, respondent concedes
that the claimed amounts were paid.
As to the amounts petitioner paid to Hillary Wood during the
years 1973 through 1977, petitioner raises on brief the
possibility that respondent would argue that the payments to
Hillary Wood were illegal payments to Iranian Government
officials or employees. Respondent has not taken that position.
The reason for disallowing the payments to Hillary Wood in the
notice of deficiency and in respondent's brief is that such
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