Darl N. and Bonnie S. Miller - Page 4




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         items in the ledger appeared to be nondeductible and/or                      
         personal in nature.  Petitioner was reluctant to provide any                 
         information beyond what was contained in the ledger on the                   
         ground that, since the items appeared in a ledger, they were                 
         necessarily correct and further verification should be                       
         unnecessary.  Petitioners would not sign a Form 872 to extend                
         the statute of limitations, and the case was forwarded for the               
         issuance of a statutory notice of deficiency.                                
              The notice of deficiency was mailed to petitioners on                   
         December 12, 1996.  The petition, consisting of seventy-seven                
         (77) paragraphs, most of which alleged "evidentiary facts",                  
         was filed on March 7, 1997.  Respondent's answer was filed on                
         March 31, 1997.                                                              
              By letter dated June 20, 1997, to petitioners' attorney,                
         David P. Leeper, respondent's appeals officer informed Mr.                   
         Leeper as follows:                                                           
              Dear Mr. Leeper:                                                        
                   I have reviewed the examiner's workpapers that                     
              were prepared in connection with the examination of                     
              the Millers' tax returns for 1993.  Based on these                      
              workpapers, many of the expenses disallowed were for                    
              lack of substantiation by the taxpayer.                                 
                   The following information is need [sic] to help                    
              resolve these issues at our scheduled appeals                           
              conference:                                                             
                   1.  A list of the recipients of the                                
                   various statuettes deducted as advertising                         
                   expense.  This list should include the                             
                   location and approximate dates the items                           
                   were placed.                                                       




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