Yung and Anita F. Chong - Page 9

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          book in support of the summary profit-and-loss statement.  Even             
          by the end of the trial, the only record that either brother                
          produced to prove any item of the partnership’s income and                  
          expenses for the 1998 tax year remained that same profit-and-loss           
          statement.  Lok claims, and we believe, that he paid Chinese                
          taxes on the partnership income, but Yung didn’t submit any                 
          Chinese tax returns--or any other records for that matter--into             
          evidence.                                                                   
               We do find that the primary reason there is so little in the           
          way of documentation is that all the records were destroyed in              
          1999.  The Chong brothers--particularly Lok, since he was the               
          onsite manager of Gourmet Down Under--should have tried to                  
          salvage or reconstruct what records he could.  See, e.g., Cox v.            
          Commissioner, T.C. Memo. 1980-244.  This sort of “reasonable                
          reconstruction” is always a good practice, and it is required for           
          expenses (like the travel expenses that the partnership claimed)            
          subject to section 274's limitations.  Sec. 1.274-5T(c)(5),                 
          Temporary Income Tax Regs., 50 Fed. Reg. 46022 (Nov. 6, 1985);              
          see Seckel v. Commissioner, T.C. Memo. 1974-170.  We have not               
          seen any evidence of any such reconstruction by either Yung or              
          Lok; we therefore are unable to apply such a defense to this                
          case.  The lack of records--compounded by the absence of any                
          testimony by Lok about any specific items of income or loss--               







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