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all of Athgarvan’s[3] tax returns.” According to petitioners,
there were no other relevant supporting documents under their
control.
Although the tax returns reported Athgarvan’s income for the
relevant taxable years, the tax returns were not indisputable
evidence of that income. Indeed, an audit of a taxpayer’s return
is an attempt to ascertain the veracity of the statements made on
the return. Respondent was not required to accept Athgarvan’s
tax returns as fact and concede the case on that basis.
Consequently, we find no error in our conclusion in McKee I that
petitioners failed to provide all relevant information under
their control on or before the date respondent filed the answer.
B. Reasonableness of Respondent’s Position in the Answer
Petitioners’ second allegation of error involves our
conclusion regarding the reasonableness of respondent’s position
on the dealer in real estate issue. In McKee I, we observed that
“The dealer in real estate issue was a close factual issue, as
evidenced by its 50/50 settlement.” Petitioners contend,
however, that respondent actually conceded about 88 percent of
the dealer in real estate issue because of concessions of
adjustments under section 453(l)(3). Petitioners argue that this
3Athgarvan Enterprises, Inc., was petitioners’ S
corporation.
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Last modified: May 25, 2011