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Petitioner testified that his listings of expenses contained
some “leftover” expenses from Welding, some fuel expenses related
to KD Technology, and some expenses related to his rental
activity. As he failed to segregate his expenses, he was unable
to identify the expenses attributable to each activity.
Because petitioner has not shown that he was engaged in an
activity for profit under the name of KD Fabricating, has not
shown for what purpose the claimed expenses might otherwise be
deductible, and if deductible, has not provided proper
substantiation, he has not shown that he is entitled to any
deductions other than those agreed to by respondent.3 See Lerch
v. Commissioner, 877 F.2d 624, 629 (7th Cir. 1989), affg. T.C.
Memo. 1987-295.
Additions to Tax
Respondent bears the burden of production with respect to
any addition to tax. Sec. 7491(c). In order to meet this
burden, respondent must produce evidence sufficient to establish
that it is appropriate to impose the addition to tax. Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001).
Addition to Tax Under Section 6651(a)(1)
The parties agree that petitioner did not file a Federal tax
return for 2002. Respondent made a return for petitioner under
3Petitioner may be entitled to deduct legal fees as
discussed supra.
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Last modified: November 10, 2007