- 3 -
In the notice of deficiency, respondent disallowed the following
expenses:
Rent $ 3,500
Wages 3,600
Office expenses 5,179
Total $12,279
Respondent agrees that the activity is a trade or business
activity engaged in for profit and disallowed the expenses for
failure to substantiate the amounts claimed. During the trial,
respondent conceded that petitioner was entitled to a deduction
for rent of $700 and $400 for wages paid that had been disallowed
in the notice of deficiency.
The nature of the activity is somewhat vague. At trial,
petitioner gave examples of the services he provided, such as
assisting businesses collecting debts from customers, searching
courthouse records or newspapers that might provide information
that could lead to assets of delinquent customers, negotiating
with debtors, etc. Petitioner had engaged in this activity only
for 2 or 3 years prior to the year at issue and had not realized
a profit in any of the prior years. The sole issue in this case
is whether petitioner substantiated the expenses disallowed.2
2Because of the year involved, the examination of
petitioner’s return at issue commenced after July 22, 1998.
Therefore, sec. 7491, which under certain circumstances shifts
the burden of proof to the Commissioner, applies. However, for
the burden to be placed on the Commissioner, the taxpayer must
(continued...)
Page: Previous 1 2 3 4 5 6 Next
Last modified: May 25, 2011