HJ Builders, Inc. - Page 9

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          to the Wrights on Schedule A, Itemized Deductions, deductions for           
          the entire $28,750 that was paid directly by the Wrights to their           
          church in 2001.  The notices determined that the $12,155 payment            
          to Lexus by HJ Builders was for a personal vehicle and treated              
          the payment of the personal expense as taxable constructive                 
          dividend income to Mr. Wright.  The notices also determined                 
          negligence penalties under section 6662 with respect to the                 
          Wrights and HJ Builders.                                                    
                                       OPINION                                        
               Our Findings of Fact describe in some detail the documentary           
          evidence presented during trial and the progress of the audit               
          that resulted in the statutory notices in issue in these cases,             
          and we discuss that evidence further below in relation to                   
          specific issues.  Because the only witness presented by                     
          petitioners was Mr. Wright, many of the issues depend, at least             
          in part, on the credibility of petitioners’ evidence.                       
          Unfortunately, we must conclude that much of the evidence is                
          unreliable.  The record establishes that expenses were mislabeled           
          and that the nature of certain of them was thus concealed;                  
          explanations were inconsistent and/or belated; and recollection             
          was nonexistent or faulty.                                                  
               Mr. Wright testified that he purposely understated his                 
          charitable contributions on his personal return because he                  
          understood that the actual amount was not fully deductible.  The            






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Last modified: May 25, 2011