Martin and Barbara Schachter - Page 17

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               Also, because petitioners’ expert’s report was based, in               
          large part, on hearsay evidence, and not on complete and legible            
          books and records of Cal Ben or of petitioners, the report is not           
          entitled to additional weight under rule 1006 of the Federal                
          Rules of Evidence as a summary of otherwise admissible voluminous           
          records.                                                                    
               Petitioner testified that $50,455 in 1985 and $84,078 in               
          1987 of payments from unreported sales deposited into the                   
          Lloyds/Sanwa account were used to purchase inventory and should             
          be treated as additional cost of goods sold.  It appears,                   
          however, that these claimed additional inventory purchases were             
          already taken into account as costs of goods sold in Cal Ben’s              
          purchase journal and partnership tax returns.                               
               With regard to illegible checks drawn on the Lloyds/Sanwa              
          account and expenses allegedly incurred for business travel,                
          entertainment, and gifts, the canceled checks and petitioner's              
          unsupported testimony fail the substantiation requirements of               
          section 274(d).                                                             
               The record in this case provides no basis, under Cohan v.              
          Commissioner, 39 F.2d 540 (2d Cir. 1930), for estimating alleged            
          additional business expenses of Cal Ben.  Other than expenses the           
          parties have agreed to, no credible evidence supports                       
          petitioners’ claim that additional business expenses were                   
          incurred by Cal Ben, and no credible evidentiary basis was                  






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