- 14 -
have not maintained adequate books and records -- general survey
data may be rejected where taxpayers, as in the instant case,
seek to use such data to overcome clear evidence of unreported
income. See, e.g., United States v. Marabelles, 724 F.2d 1374,
1381-1382 (9th Cir. 1984); Lollis v. Commissioner, 595 F.2d 1189,
1190-1191 (9th Cir. 1979), affg. T.C. Memo. 1976-15; Cebollero v.
Commissioner, 967 F.2d 986 (4th Cir. 1992), affg. T.C. Memo.
1990-618. As we have stated --
Such evidence is * * * of little probative value * * *
and * * * too speculative to serve as the basis for
additional reductions in gross income * * * [Farrow v.
Commissioner, T.C. Memo. 1985-518.]
We note that once respondent has established unreported
sales, the taxpayer has the burden of proving with credible
evidence expenses that would offset the unreported sales. See
United States v. Marabelles, supra at 1379; Barragan v.
Commissioner, 69 F.3d 543 (9th Cir. 1995) (citing Elwert v.
United States, 231 F.2d 928, 933 (9th Cir. 1956)), affg. without
published opinion T.C. Memo. 1993-92; Avery v. Commissioner, T.C.
Memo. 1993-344.
For the first time at trial, petitioners asserted their
entitlement to additional deductible business expenses for Cal
Ben. The petition filed by petitioners made no allegation with
regard to unclaimed partnership expenses, and general and vague
references in the petition to “additional” facts do not satisfy
the affirmative pleading requirement of Rule 34(b) with regard to
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011