Joel Rappaport - Page 10

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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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