David E. and Rebecca Newman - Page 12

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                  Petitioners have failed to offer any evidence to suggest                             
            that they acted with reasonable cause and good faith with respect                          
            to their reporting of the purported cost of goods sold.                                    
            Petitioner contends that he employed a full time assistant for                             
            the purpose of keeping records of his various business                                     
            activities.  Petitioner testified that he requested that his                               
            assistant keep records of every deal with Lee, but later                                   
            discovered that the records had been discarded.  Petitioners                               
            contend that “While petitioner was unable to produce any of the                            
            records that were to be kept by his assistant through no fault of                          
            his own, his record keeping attempts in this regard were not                               
            unreasonable.”  We disagree.  Petitioners have failed to show                              
            that they exercised ordinary care and business prudence in                                 
            keeping records necessary to comply with the tax laws.                                     
            Petitioner’s uncorroborated, self-serving testimony simply fails                           
            to convince us that his record keeping attempts were reasonable,                           
            and his attempt to shift the blame to his assistant is equally                             
            unconvincing.  Either petitioners were not engaged in the                                  
            computer chip sales business, in which case they had no basis for                          
            claiming cost of goods sold, or they utterly failed to maintain                            
            any records to support the computer chip sales business and the                            
            costs incurred in it.  To the extent that records do exist, they                           
            do not support petitioner’s claim that he was in the computer                              
            chip sales business or that he had cost of goods sold.                                     

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