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Notice of Deficiency
In the notice of deficiency, respondent disallowed
petitioner’s Schedule C bad debt deduction of $20,000 and his
Schedule C legal expense deduction of $1,300. As a result of
these adjustments, respondent made a computational adjustment
reducing petitioner’s itemized deductions by $2,195 but did not
otherwise disallow the itemized deductions petitioner had claimed
on Schedule A. Respondent did not assert that petitioner was
liable for any addition to tax or penalty.
Amendment to Answer
After respondent uncovered evidence that petitioner had
overstated his Schedule A itemized deductions and had falsified
documentation to substantiate his Schedules A and C deductions,
respondent amended his answer to the amended petition to assert
an additional deficiency of $5,784.14 (thereby increasing the
total claimed deficiency for 2001 to $10,980.143) resulting from
the complete disallowance of petitioner’s itemized deductions for
lack of substantiation. Respondent also asserted for the first
time that petitioner was liable for the fraud penalty pursuant to
section 6663(a).
3In his motion, respondent conceded a computational mistake
in calculating the original deficiency. The corrected original
deficiency is $5,196.
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Last modified: May 25, 2011