- 6 - Changes, and Form 886-A, Explanation of Adjustments. The Form 4549A reveals that the deficiency arises from respondent’s disallowance of petitioner’s claimed business deductions for 2001 and 2002, associated reductions in itemized deductions and exemptions for 2001 and 2002, and respondent’s imposition of section 6662(a) penalties for 2001 and 2002.3 The only meaningful explanation for respondent’s disallowance of petitioner’s claimed business deductions appears on the Form 886-A and reads as follows: We disallowed the Schedule C expense amounts shown on your returns because we did not receive an answer to our request for supporting information. To be allowed a deduction, expense, exemption, credit, or other tax benefit, you must establish that you have met all requirements of the law. Since you did not do so, we have adjusted your deductions shown below to the amounts verified. Accordingly, we have increased your income $55,348 for tax year 2001 and $48,001 for the tax year 2002. Discussion I. Burden of Proof At trial and on the brief, respondent argued that petitioner was precluded from claiming the Schedule C deductions on his 2001 and 2002 income tax returns because the deductions related to start-up expenditures within the meaning of section 195, and 3 Because respondent determined that petitioner was not entitled to the deductions on his Schedules C for 2001 and 2002, respondent also determined that petitioner’s 2001 and 2002 income included the interest reported on the Schedules C of $161 and $43 for 2001 and 2002, respectively.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: November 10, 2007