- 387 -
To the contrary, respondent argues that Kanter received barter
income from Principal Services's payments of expenses out of
Kanter's special accounts because the expenses were paid in
exchange for substantial legal services performed for Principal
Services.
We agree with Kanter on this issue. There is no proof that
he realized barter income from Principal Services. Any legal
services performed by Kanter for Principal Services in 1988 and
1989 were minimal at best. Respondent's determination with
respect to this income adjustment was erroneous on its face and
lacking in a rational evidentiary foundation. Respondent offered
no evidence to support this income adjustment but relied on the
presumption of correctness of the deficiency notice. We reject
respondent's position and hold that Kanter did not realize barter
income from Principal Services during 1988 and 1989.
Issue 9. Whether the Kanters Are Entitled to Certain Deductions
Claimed on Schedule A and Schedule C for 1986 Through 1989
FINDINGS OF FACT
For 1986, 1987, 1988, and 1989, almost all of the expenses
claimed on Schedules A and C of the Kanters' Federal income tax
returns were paid through funds from the Administration Co.
special E, Administration Co. special, Principal Services special
E, and Principal Services special accounts, which funds belonged
to Kanter.
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