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2. Respondent’s Adjustments
The J. Shirleys’ notice explains respondent’s attribution of
Alexion Trust’s gross receipts to the J. Shirleys as follows:
“Based on currently available evidence, the previous examination
adjustment has been reversed.” It explains the adjustment for
depreciation as follows: “Since you have provided evidence to
establish your basis in the S-Corporation, you are allowed the
loss as claimed on your original tax return.” Although such
explanations are not clear to us (the explanation with respect to
depreciation makes no sense at all), apparently, the J. Shirleys
understood respondent’s reasons for making those two adjustments.
In their petition, the J. Shirleys assign error to respondent’s
determination of a deficiency and, in support of that assignment,
aver that both Alexion Trust and Caralan Trust are valid trusts,
and not “abusive trusts”, which trusts, established by the
J. Shirleys, “were not established to avoid or evade taxes or for
any tax-related purpose.” They further aver: “All income,
expenses, deductions, and distributions which were attributable
to those valid trusts were properly and accurately reported by
those trusts”. They aver no specific facts, however, to support
that claim. For example, they aver nothing concerning the
employment relationship (if any) between either Joseph or Frances
Shirley and Alexion Trust and nothing concerning any contractual
relationship between the Alexion Trust and any customer.
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