- 6 -
when they were issued. Even after the checks were endorsed by
the payee children and petitioner, he retained control of the
proceeds. Petitioner did not set up separate accounts for his
children in which to deposit their alleged wages; instead,
petitioner kept the proceeds and either reinvested the proceeds
into his business or deposited said proceeds into his own
personal account. Petitioner also never established an hourly
rate for his children’s services. His children were paid a set
amount for both years.
Petitioner has failed to carry his burden of proof with
respect to the deductions taken for wages paid to his children,
and thus respondent’s determination must be sustained. See
Romine v. Commissioner, 25 T.C. 859 (1956); Chappell v.
Commissioner, T.C. Memo. 2001-146; Medina v. Commissioner, T.C.
Memo. 1983-253; Snyder v. Commissioner, T.C. Memo. 1975-221.
Accuracy-Related Penalty
Respondent determined that petitioners are liable for the
accuracy-related penalty under section 6662(a) with respect to
the underpayment attributable to the disallowed deductions for
Schedule C wages.
Section 7491(c) provides that the Commissioner shall have
the burden of production in any court proceeding with respect to
the liability of any individual for any penalty, addition to tax,
or additional amount. Specifically, section 7491(c), which was
Page: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011