- 37 -
the substantial majority of its after-tax profits to DM. There
is no evidence that petitioner received any economic benefits
from the payments to DM beyond the value of the licensed assets.
The excessive portion of the payments to DM is not deductible
under this argument.
In the notice of deficiency, respondent did not allow
petitioner to deduct any portion of the disallowed payments to DM
as charitable contributions under section 170. Petitioner did
not address on brief the deductibility of the excess payments to
DM as charitable contributions under section 170 and has not
proven that it is entitled to section 170 deductions.
Net Operating Loss Deduction
Respondent disallowed NOL deductions in taxable years 1991
and 1993. Petitioner generally has the burden of proof with
regard to NOL deductions. Hill v. Commissioner, 95 T.C. 437,
439-444 (1990). Petitioner contends, however, that respondent
has the burden to show that petitioner is not entitled to the NOL
carryforwards because respondent did not specify the disallowance
of the NOL’s in the statements or explanations attached to the
notice of deficiency.
Respondent is not required to provide a factual basis for
disallowed deductions. United States v. Zolla, 724 F.2d 808,
809-810 (9th Cir. 1984); Finkelman v. Commissioner, T.C. Memo.
1989-72, affd. 937 F.2d 612 (1991). The notice must (1) advise
the taxpayer that respondent in fact has determined a deficiency,
and (2) specify the year and amount of the deficiency. Campbell
Page: Previous 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 NextLast modified: May 25, 2011