Ronnie F. Judy - Page 7

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            reported that the condition of Mr. Judy’s health precluded a                              
            deposition.  Petitioner’s report was accompanied by a one-                                
            sentence note written on a doctor’s prescription pad and signed                           
            by J. Richard Allison III, M.D., which read:  “Pt. [patient]                              
            should be up on feet for short distance and short period of time                          
            only.”  In early February we discussed this matter with the                               
            parties in a telephone conference call.  When we suggested a                              
            bedside deposition of Mr. Judy as an accommodation, and asked                             
            petitioner if he would be willing to bear the additional                                  
            transportation costs that respondent would incur in coming to his                         
            home, petitioner was noncommittal, stating that he could probably                         
            make such arrangements but “it would take a while.”  Mr. Judy was                         
            not deposed.  By Order dated March 29, 1996, the record was                               
            1.   Unreported Income                                                                    
                 Every taxpayer is required to maintain sufficient records to                         
            enable the Commissioner to establish the amount of his taxable                            
            income.  Sec. 6001; sec. 1.6001-1(a) and (b), Income Tax Regs.                            
            If such records are lacking, the Commissioner may reconstruct the                         
            taxpayer’s income by any indirect method that is reasonable under                         
            the circumstances.  Cebollero v. Commissioner, 967 F.2d 986, 989                          
            (4th Cir. 1992), affg. T.C. Memo. 1990-618; Petzoldt v.                                   
            Commissioner, 92 T.C. 661, 687 (1989); Schellenbarg v.                                    

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