Donald C. Richardson and Rita M. Allaire - Page 18

                                       - 18 -                                         

               Respondent had interviewed a third-party former employee of            
          PCCL.  This interview provided respondent with information that             
          PCCL was "fixing its books".  In addition, respondent had                   
          received documentation from Paige, which was supported by the               
          interview with the employee.                                                
               In Simpson Fin. Servs., Inc. v. Commissioner, T.C. Memo.               
          1996-317, the Commissioner disallowed a portion of the taxpayer's           
          claimed expenses because of lack of substantiation.                         
          Documentation was eventually provided to the Commissioner's                 
          appeals officer, and subsequently to District Counsel.  Based on            
          the documentation provided to the Commissioner, the parties                 
          settled all issues raised in the notice of deficiency.  We denied           
          the taxpayer's request for an award of attorney's fees.                     
          Specifically, we said:                                                      
               In the notices of deficiency, respondent premised the                  
               adjustments primarily on petitioners' failure to                       
               substantiate items on their returns.  Deductions are a                 
               matter of legislative grace, and petitioners bore the                  
               burden of establishing their entitlement thereto. * * *                
               In addition, section 6001 imposed on petitioners an                    
               affirmative duty to maintain books and records                         
               sufficient to establish items reported on their                        
               returns.  It was reasonable for respondent not to                      
               concede the adjustments until she had received and                     
               verified adequate substantiation for the items in                      
               question.  Harrison v. Commissioner, 854 F.2d 263, 265                 
               (7th Cir. 1988), affg. T.C. Memo. 1987-52; Sokol v.                    
               Commissioner, 92 T.C. 760, 765 (1989).  [Citation                      

Page:  Previous  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  25  Next

Last modified: May 25, 2011