Patrick S. Elliott and Donna J. Elliott - Page 15




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               To the extent that you wish to claim the expenses shown                
               on Form 2106, they must be claimed on Schedule A, but                  
               they are allowable only to the extent that you show                    
               them to be ordinary and necessary business expenses                    
               and/or to have been expended for the designated                        
               purposes.                                                              
          If respondent had made an explanation regarding the offsetting              
          expenses, it would have been merely advisory and precatory.  It             
          would not explain a disallowance that resulted in an income tax             
          deficiency.  In the circumstances of these cases, respondent’s              
          failure to expressly disallow the offsetting expenses was not               
          tantamount to approving them as petitioners have contended.                 
               The Commissioner is required to inform taxpayers of                    
          deficiency determinations.  There is no particular form to be               
          used or specific requirement as to the content of a notice of               
          deficiency.  Jarvis v. Commissioner, 78 T.C. 646, 655-656 (1982).           
          The notice must “fairly advise [petitioners] that deficiencies in           
          income taxes and additions to the tax had been determined and the           
          years and amounts thereof.”  Id.  In addition, section 7522                 
          requires that the notices describe the basis for, and identify              
          the amounts (if any) of, the tax due.                                       
               The notices that respondent issued to petitioners met those            
          basic standards.  Respondent did provide a paragraph explaining             
          each adjustment that accounted for the total amounts of the                 
          deficiencies determined.  Respondent increased gross income by              
          the Form 1099-MISC compensation, unreduced by the amounts of                
          expenses that petitioners had used as setoffs on the Forms 2106.            





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