Peter Wood - Page 6

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          proprietorship for each of the years at issue:                              
                     Year             Gross Receipts                                  
                     1995               $449,283.08                                   
                     1996               330,646.69                                    
                     1997               339,646.51                                    
               On January 9, 1996, respondent sent petitioner a letter                
          (respondent’s first notice of inadequate records) notifying him             
          that he was not keeping adequate records with respect to peti-              
          tioner’s sole proprietorship, as required by the Code, which                
          would enable him to report accurately, and respondent to verify             
          accurately, petitioner’s tax liability.5  Respondent’s first                
          notice of inadequate records directed petitioner to send respon-            
          dent within six months an explanation (required explanation) of             
          how petitioner had corrected his recordkeeping in order to meet             
          the requirements of the Code.                                               
               On July 22, 1996, respondent sent petitioner a letter                  
          (respondent’s second notice of inadequate records) informing                
          petitioner that respondent had not received from him the required           
          explanation.6  Respondent’s second notice of inadequate records             
          directed petitioner to notify respondent within 15 days about the           
          steps that he had taken to correct the recordkeeping problems               
          described in respondent’s first notice of inadequate records.               

               5Respondent’s first notice of inadequate records did not               
          indicate the year or years to which that notice pertained.                  
               6Respondent’s second notice of inadequate records indicated            
          that it pertained to petitioner’s taxable years 1991, 1992, and             
          1993.                                                                       




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