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B. Whether Items Deducted on the Forms 1120S for 2001 for JRC
and RSC Flow Through to Petitioner’s Individual Tax Return
1. Background
JRC and RSC delinquently filed their Forms 1120S for 2001,
and petitioner delinquently submitted his Form 1040 for 2001. In
his Form 1040, petitioner reported flow-through expenses from JRC
and RSC. Respondent disregarded those expenses in the amended
answer because petitioner did not respond to respondent’s request
to substantiate them. After trial, this Court gave petitioner 4
months to provide respondent with substantiation of the flow-
through items. Petitioner failed to do so.
2. Burden of Proof
Petitioner filed a motion to shift the burden of proof to
respondent 2 months after the deadline for providing the
additional substantiation. Petitioner contends that respondent
bears the burden of proving the increased deficiency respondent
asserted in the amendment to answer. Petitioner contends that
respondent bears the burden of proof under Rule 142(a)(1) because
the denial of deductions is a new matter which, if sustained,
would increase the deficiency. We disagree.4
Respondent did not allow petitioner any deductions for 2001
in the notice of deficiency, the answer, or the amendment to
4 Petitioner concedes he is taxable on the increased income
reported on his Form 1040 for 2001. Thus, the burden of proof
does not affect whether he is taxable on those amounts.
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Last modified: May 25, 2011