- 7 - * * * apparently even illegal things going on by some of the people who were connected with the company.”7 Petitioners filed their joint 2000 Federal income tax return on or about August 13, 2001. They reported gross income of $2,713 and expenses of $17,464 from the RTP activity, for a loss of $14,751. Petitioners did not have RTP prepare the return, according to Mr. Sears, because RTP had been “shut down” before that time. Respondent determined that the RTP activity was not a trade or business for Federal income tax purposes because it was not engaged in for profit. Respondent disallowed petitioners’ claimed expense deductions, except to the extent of gross income from the activity. As an alternative position, respondent disallowed certain claimed expense deductions for lack of substantiation. Discussion In general, the Commissioner’s determinations set forth in a notice of deficiency are presumed correct, and the taxpayer bears the burden of showing that the determinations are in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Pursuant to section 7491, the burden of proof as to factual matters shifts 7 The stipulation of facts states that three people pleaded guilty to crimes related to their involvement with RTP. The crimes include conspiracy to commit mail and wire fraud; assisting, counseling, and advising in the preparation of a false and fraudulent tax return; and defrauding the IRS.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011