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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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