Phillip A. O'Bryon and Cyndie W. O'Bryon - Page 25

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          for 1994.  In the parties' settlement, respondent conceded the              
          1992 and 1993 Schedule E loss deductions but disallowed a                   
          deduction for the 1994 Schedule E loss.                                     
               Although Mr. Fried agreed to accept the 1992 and 1993 tax              
          returns for the O'Bryon Co. for the purpose of establishing                 
          Phillip's basis, we hardly think those returns, by themselves,              
          were sufficient for that purpose.  A reasonable person would                
          doubt the credibility of the tax returns supplied, considering              
          that Phillip, as its sole shareholder, used the O'Bryon Co. as a            
          vehicle to engage in fraudulent activities.                                 
               In addition, petitioners failed to provide any evidence                
          establishing Phillip's 1994 basis in the company.  Petitioners              
          contend that they produced documentation establishing the 1994              
          basis on March 16, 2000, but that a failure in communication                
          between respondent's Appeals officer and counsel resulted in                
          petitioners' reluctant concession of the Schedule E deductions              
          for that year.  Petitioners' argument is unpersuasive, especially           
          in light of the tardiness of the alleged production.                        
               No evidence was produced to support the particular items               
          claimed on the corporation's return or to show how Phillip's                
          basis in the corporation was calculated.  Whenever there is a               
          factual determination with respect to a tax return, respondent is           
          not obliged to concede the case until the necessary documentation           
          is received to prove the taxpayer's contentions and claims.  See            

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