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B. Expenses Beyond Those Allowed in Deficiency Notice
Mr. Runkle has been a self-employed insurance salesman since
1986, and, as previously discussed, Mr. Runkle refused to
cooperate with respondent during the examination for the years
1991, 1992, and 1993. Lacking his cooperation, respondent
determined Mr. Runkle’s net income for insurance-related sales
from third-party information of deposits and checks obtained
pursuant to third party summonses. As to expenses for Mr.
Runkle’s insurance-related activities, respondent determined
deductions based on insurance-related expenses Mr. Runkle claimed
on petitioners’ income tax returns for 1988, 1989, and 1990.
From this analysis, respondent determined that Mr. Runkle was
entitled to deductions against self-employment insurance income
at the rate of 19.2 percent.
Mr. Runkle argues that, despite not having any documents to
substantiate his expenses, he is entitled to deductions at the
rate of 52.6 percent based on what he claims is an industry
average. We are thus asked to decide whether Mr. Runkle is
entitled to insurance-related expenses in excess of the amounts
that respondent allowed in the deficiency notice.
We begin with two fundamental principles of tax litigation.
First, as a general rule, the Commissioner’s determinations are
presumed correct, and the taxpayer bears the burden of proving
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