J. Ramsay Farah and Elizabeth Farah - Page 13

          activities with Sierra.  Instead, he relied on records maintained           
          by Sierra, which were destroyed in the fall of 2004.                        
               The Schedule D, Capital Gains and Losses, attached to their            
          2001 return reported an amount realized of $600,000 from the sale           
          of their Berlin house and a corresponding adjusted basis of                 
          $600,000.  The Schedule D did not report the sale of the South              
          Point Road lot.  The Schedule E, Supplemental Income and Loss,              
          reported a loss from the Boonsboro Partnership of $45,733.                  
               On September 19, 2005, respondent issued petitioners a                 
          notice of deficiency, disallowing petitioners’ Schedule C                   
          expenses and Schedule E loss.  Respondent also adjusted                     
          petitioners’ income to include a capital gain of $660,371 on the            
          sale of the Berlin house and the South Point Road lot.                      
          A.   Burden of Proof                                                        
               Generally the taxpayer bears the burden of proving the                 
          Commissioner’s determinations are erroneous.  Rule 142(a).                  
          However, the burden of proof with respect to a factual issue                
          relevant to the liability of a taxpayer for tax may shift to the            
          Commissioner under section 7491(a) if the taxpayer has produced             
          credible evidence relating to the issue, has met his                        
          substantiation requirements, maintained records, and cooperated             
          with the Secretary’s reasonable requests for documents,                     
          witnesses, and meetings.                                                    

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