David Lee Smith and Mary Julia Hook - Page 7

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          records, each containing hundreds or perhaps thousands of                   
          documents on the ground that respondent had refused to stipulate            
          after petitioner had proffered them on May 1, 2002, only 1 day              
          before the trial date.                                                      
               Respondent’s counsel explained that she refused to blindly             
          stipulate four boxes of materials without some explanation or               
          understanding of the individual documents and their relevance               
          and/or relation to the controverted expense or income items.  The           
          adjustments for petitioners’ 1992, 1993, and 1994 tax years                 
          involved:  Underreported gross receipts and disallowed expenses             
          and depreciation on Schedules C (Profit or Loss From Business),             
          income from a distribution from a retirement account for 1993,              
          increase and decrease of reported rental income, disallowance of            
          miscellaneous itemized deductions, self-employment tax, and                 
          additions to tax under sections 6651(a)(1) and 6662.  The                   
          adjustments involved numerous individual items.                             
               During the May 2, 2002, hearing, the Court inquired of                 
          petitioners as to the organization of the contents of the four              
          boxes.  Petitioner Smith, in response, explained that the                   
          documents were not necessarily in chronological order and that              
          individual folders did not necessarily relate to any particular             
          adjustment in the notice of deficiency.  The Court inspected one            
          of the numerous documents, a folder, and found that it contained            
          a large volume of loose papers and miscellaneous documents.                 






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