- 3 - The circumstances of the search of Mr. Kersting's offices are described in the Court's opinion in Dixon v. Commissioner, 90 T.C. 237 (1988) (Dixon I). On April 15, 1982, respondent issued a joint notice of deficiency to petitioners determining a deficiency in their Federal income tax for 1978 in the amount of $47,580.75 and an addition to tax under section 6653(a) in the amount of $2,379.3 The notice of deficiency, in a form apparently used by respondent in issuing notices of deficiency to a number of taxpayers with Kersting-related adjustments, states in pertinent part: EXPLANATION OF ADJUSTMENTS 1. It is determined that the following amounts claimed on your 1978 income tax return as interest deductions are not allowable: Amount Purported Payee $67,972.50 Any entity owned, associated with, or controlled, either directly or indirectly, by Henry Kersting This disallowance is based on the determination that the transaction giving rise to the claimed interest deduction are shams. This disallowance is further based upon your failure to establish that the above amounts were paid or properly accrued, or that the transactions purportedly generating the claimed amounts resulted either in any bona fide indebtedness or in any enforceable and bona fide obligation to pay 3 The notice of deficiency was issued approximately 70 days prior to the expiration of the normal 3-year period of limitations applicable to the assessment of Federal income taxes. Sec. 6501(a).Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011