- 10 -
On May 15, 1996, respondent issued a notice of
deficiency to petitioner for taxable years 1989 and 1990.
This is the second notice of deficiency respondent issued
with respect to petitioner's 1990 return. Among other
adjustments made in this notice, respondent disallowed
$50,141 of the $103,784 claimed as returns and allowances
on petitioner's 1989 return, and respondent disallowed the
entire $97,854 claimed as returns and allowances on
petitioner's 1990 return. The notice of deficiency
describes this adjustment as follows:
The deductions of $103,784.00 and $97,854.00
shown on your 1989 and 1990 returns as returns
and allowances are reduced by $50,141.00 and
$97,854.00 because it has not been established
that any amount more than $53,643.00 for 1989 and
-0- for 1990 was for an ordinary and necessary
business expense, or was expended for the purpose
designated. Therefore, your taxable income is
increased $50,141.00 for 1989 and $97,854.00 for
1990.
OPINION
I. Period of Limitations on Assessment and Collection
The first issue for decision is whether respondent
issued the subject notice of deficiency after the period of
limitations on assessment and collection under section
6501(a) had expired for both of the taxable years in issue,
1989 and 1990. Petitioner's principal position is
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