Lavern Scherping - Page 7

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               Petitioners have known from the outset of this proceeding              
          that no deductions for interest expense were included in                    
          respondent's determinations of their taxable incomes.  They have            
          chosen not to submit any documentation as to the amounts of                 
          interest they (or Imperial) may have paid during the years in               
          issue, the fact and nature of any debt underlying the supposed              
          payments, the creditors to whom the interest may have been paid,            
          or the relationship of any such debt to the dairy farming                   
          activities that gave rise to the income at issue here.                      
               Petitioners point out that respondent has offered no                   
          explanation for not allowing them to deduct the interest expense            
          claimed on Imperial's returns.  They also note that in an earlier           
          proceeding before this Court, respondent agreed to a stipulated             
          decision that Imperial owed no additional income tax.                       
               In demanding that respondent explain the omission of the               
          interest deduction, petitioners proceed from a false premise.               
          They are required to produce persuasive evidence rebutting                  
          respondent's determinations of their Federal income tax                     
          liabilities.  Finesod v. Commissioner, T.C. Memo. 1994-66.  They            
          have not done so.  We therefore sustain respondent's                        
          determinations on this issue.                                               
          Negligence                                                                  








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