Kenneth W. and Fayetta Graves - Page 10

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          $85,009.  Petitioners are now claiming $86,040 for the business             
          bad debt deduction.                                                         
               Petitioners contend that an amended return was sent to the             
          Internal Revenue Service claiming $86,040 for the business bad              
          debt on Schedule C and correcting the pension income.  Respondent           
          has no record of receiving the amended return.  Irrespective of             
          whether an amended return was filed, petitioners bear the burden            
          of showing the amounts of deductions.  Specifically, petitioners            
          bear the burden of proving they are entitled to the deductions              
          claimed.  See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84                
          (1992); Higbee v. Commissioner, 116 T.C. 438, 440 (2001).                   
               Respondent allowed an $85,009 business bad debt deduction in           
          the notice of deficiency.  That allowance was $275 more than the            
          $84,734 petitioners claimed on their original return.  At trial,            
          petitioner, by means of testimony and documents, substantiated              
          that the loans to KPS totaled $86,040.  On the basis of this                
          evidence, we hold petitioners are entitled to a deduction for the           
          business bad debt in the amount of $86,040.                                 
          Addition to Tax and Accuracy-Related Penalty                                
               Respondent determined an addition to tax under section                 
          6651(a)(1) and an accuracy-related penalty under section 6662(a).           
          Section 7491(c) requires the Commissioner to carry the burden of            
          production in any court proceeding with respect to the liability            
          of any individual for any penalty, addition to tax, or additional           






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