James J. Coyle - Page 14

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          March 31, 1992 and 1993, respectively.  Those amounts were not              
          reported on the returns for those years.  We are also satisfied             
          that Mr. Coyle ultimately received the amounts paid to Regal for            
          the wheels and axles.  Accordingly, Regal is entitled to                    
          deductions for commissions paid as determined by respondent, as             
          discussed below, for the tax years ending March 31, 1992 and                
          1993, of $13,948, and $45,741, respectively.                                
               While there is no doubt that Regal omitted gross receipts,             
          the corresponding deductions for commissions paid result in no              
          underpayments of tax with respect to sales of wheels and axles.             
          However, the underpayments of tax and the deficiencies respondent           
          determined for the years in issue are based on adjustments of               
          other items including:  (1) A disallowed deduction for claimed              
          bad debts; (2) a disallowed deduction for State sales tax; and              
          (3) omitted income from volume rebates.  Regal did not present              
          any evidence that would suggest that respondent’s determinations            
          were not correct as to these items.                                         
               On the basis of respondent’s determination and Regal’s                 
          failure to present evidence to establish that the determination             
          is not correct, we would normally sustain the determination as to           
          these items.  However, since respondent relies on (1) fraud under           
          sections 6663 and 6501(c)(1), and (2) substantial omission under            
          section 6501(e) as affirmative defenses to the running of the               
          period of limitations, we withhold any further consideration of             

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