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As a result, respondent obtained information which provided a
basis in fact for respondent's position in the notice of
deficiency.
2. Respondent's Basis in Fact for the Determination
Petitioners contend that respondent had no basis in fact for
the position that the decedent and Mrs. Spear had no cash on hand
on January 1, 1975, and that petitioners were liable for the
addition to tax for fraud. We disagree.
Respondent's basis in fact for determining that the decedent
and Mrs. Spear had no cash on hand on January 1, 1975, was: (a)
Mrs. Spear told respondent's agents that they did not have cash
at home, at their business, or on their persons; (b) petitioners
borrowed money to buy real estate; and (c) petitioners signed a
financial statement attached to a mortgage application in which
they stated that they had $2,800 in cash, which they used as a
downpayment on the property and listed no other assets or cash
balances. Respondent's basis in fact for concluding that Abe
Spear did not give petitioners a cash gift was information
indicating that he did not have the means to do so. For example,
before issuing the notice of deficiency, respondent learned that
Abe Spear pawned family jewelry and borrowed money, including
$1,000 from his daughter Sadie.
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