- 12 -
11/30/95 11/30/96 11/30/97
Food & lodging1 $13,470 $15,722 $15,272
Medical 2,052 3,264 3,571
Total dividends 15,522 18,986 18,843
1The record does not explain why the amounts of
dividends for food and lodging expenses included in the
Schmidts’ income exceed the amounts disallowed as
deductions to Hillside Dairy.
OPINION
Issue 1. Expenses Incurred by Hillside Dairy To Provide Medical
Benefits, Food, and Housing to the Schmidts in 1995,
1996, and 1997
A. Positions of the Parties6
Respondent disallowed deductions taken by Hillside Dairy for
medical costs (health insurance premiums and other medical care
expenses), food, lodging (including property insurance, property
taxes, and utilities for the farmhouse), and depreciation of the
farmhouse. Respondent asserts that the medical costs, food, and
lodging expenses are the Schmidts’ personal, family, and living
6Under certain circumstances, sec. 7491 places the burden of
proof or production on the Commissioner. Sec. 7491 applies to
court proceedings arising in connection with tax examinations
beginning after July 22, 1998. Internal Revenue Service
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3001(a), 112 Stat. 726. Petitioners timely filed their returns
for the years at issue. Hence, all of the returns were filed on
or before Apr. 15, 1998. The record does not disclose when the
examination of petitioners’ tax returns began, and it is possible
that the examination began before July 23, 1998. Petitioners do
not contend that sec. 7491 applies in these cases, and they have
not otherwise asserted that respondent has the burden of proof or
production with respect to any issue presented in these cases.
We therefore conclude that sec. 7491 does not apply, and
petitioners have the burden of proof and production.
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