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the gift was $21,365, and that the value of the gift at the date
of transfer was also $21,365.
Later that month, on January 22, 1996, petitioner submitted
a Federal income tax return (Form 1040) for 1993, which was
executed by Mr. Magness on petitioner’s behalf. The return
reflected a loss from the sale of petitioner’s interests in the
Barrington Park and Southmark/Envicon limited partnerships that
respondent had disallowed for 1986.
On February 27, 1996, respondent’s Problem Resolution Office
sent Mr. Peterson a letter regarding petitioner’s amended income
tax returns for 1985 and 1986. The letter included an
itemization of the documents and information that were needed in
order to process the amended returns. The letter also stated, in
part, as follows:
The over-riding problem throughout the examination
report centers around Mr. Hawksley’s failure to keep
any kind of contemporaneous record of his business
expenses.
Another problem is that Mr. Hawksley’s employer
provided a copy of a reimbursement policy, which
indicated he could have been reimbursed for certain
travel, entertainment, and moving expenses, had he
applied for same in advance.
The examiner’s conclusion * * * that all of Mr.
Hawksley’s documentation lost validity and confidence
was based on a two-fold observation: 1) The
documentation provided during the course of the
examination was apparently not what was used to prepare
the original return, as there were large discrepancies
between amounts presented to our examiner and those
reported on the return; AND 2) Taxpayer’s inability to
provide substantiation for one entire expense item--
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