- 29 -
and by Crocus’s status as a foreign entity whose financial
records have not been made part of the record.18
We interpret the parties’ stipulated instruction not to draw
any adverse inference against either of them from the disregarded
royalty agreement with ECI as a direction not to apply the rule
of Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158,
1165 (1946), affd. on other grounds 162 F.2d 513 (10th Cir. 1947)
against either of them, despite the lack of relevant record
evidence they did not show was not within their power to produce.
We further interpret the parties’ stipulated instruction not to
draw adverse inferences as being primarily for the protection of
petitioner and as directed primarily to what might be otherwise
justified suspicions generated by the existence and terms of the
royalty agreement in the first place, not by the stipulation of
17(...continued)
and a litigant claiming the privilege is not freed from adducing
proof in support of a proposition on which he has the burden of
proof. United States v. Rylander, 460 U.S. 752, 758 (1983);
United States v. 4003-4005 5th Ave., 55 F.3d 78, 83 (2d Cir.
1995). Petitioner’s failure to present sufficient evidence is
not excused by the invocation of the Fifth Amendment privilege by
its stockholders.
18This is another of those cases in which we “have sought to
delineate a path through the thicket of problems which inhere in
a situation where the liability of a U.S. taxpayer is related to
information in the hands of a foreign entity and access to that
information involves the attitude of that foreign entity and the
application of the laws of a foreign country.” Gerling Intl.
Ins. Co. v. Commissioner, 98 T.C. 640, 646-648 (1992), on remand
from 839 F.2d 131 (3d Cir. 1988), revg. and remanding 87 T.C. 679
(1986), supplementing 86 T.C. 468 (1986).
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