- 19 - * * * * * * * As a legal matter, the petitioners were required to substantiate the deductions claimed on their returns. As a factual matter, the information available to respondent at the time of Answer was that, although the representative prepared petitioners’ returns and was in possession of the records which he used to prepare the returns, the representative failed to communicate with the Agent in order for those records to be inspected.5 Respondent submits that, under these circumstances, it was reasonable for respondent to answer the case and require petitioners to submit their substantiation for review before respondent conceded the adjustments. * * * * * * * ______________ 3 Moreover, the file reflected that, considering the circumstances, the Agent had not been unreasonable in exploring the possibility of extending the statutes of limitations. * * * * * * * 5 Respondent does not argue that it was unreasonable of petitioners’ representative to decline to extend the statute of limitations. Rather, it is respondent’s position that the substantiation could have been provided beginning April 23, 1996, allowing consideration prior to the issuance of the statutory notice. * * * Petitioners maintain as follows: 1. Respondents [sic] denial of substantially all of Petitioners’ deductions on their 1991 and 1992 individual income tax returns was not substantially justified because Respondent did not have a basis in both fact and law for the disallowance at the time Respondent issued the notice of deficiency or during the litigation of this case. 2. Petitioners are entitled to an award for administrative and litigation costs [see supra note 1] under I.R.C. Section 7430 since Respondent’s position was not substantially justified either when Respondent issued the notice of deficiency or during the litigation of this case. * * * * * * * Respondent’s position did not have a reasonable basis in both fact and law because Respondent had no informationPage: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Next
Last modified: May 25, 2011