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depreciation deductions on the transferred assets on the basis of
their alleged fair market values at the time of transfer to the
trusts, rather than on original cost or depreciated basis in
petitioner’s hands.
Petitioner filed a Form 1040, U.S. Individual Income Tax
Return, reporting $10,613 in taxable income for 1996 and $13,380
in taxable income for 1997. These returns reported Federal
income tax liabilities of $2,465 for 1996 and $4,497 for 1997.
Each of the trusts filed Forms 1041, U.S. Income Tax Return for
Estates and Trusts, for tax years 1996 and 1997 reporting
negative taxable income.
Respondent commenced an examination of petitioner’s 1996 and
1997 tax returns after July 22, 1998. In connection with the
examination, respondent sent petitioner a letter requesting that
he produce his records for examination. On January 21, 1999,
respondent’s revenue agent met petitioner and his adviser, Ilena
Hamilton, at respondent’s office.
Petitioner began the meeting by declaring he would not
provide any information concerning the trusts because he was
under some unspecified duty not to disclose trust information.
Petitioner told respondent’s revenue agent to obtain the trust
information from the trustees. Petitioner refused to identify
the trustees or to disclose how respondent could obtain the
information.
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