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Business; (3) whether petitioner is entitled to a Schedule A
deduction for the writeoff of unsold inventory that belonged to a
discontinued trade or business activity; and (4) whether
petitioner is liable for the section 6651(a)(1) addition to tax.
Some of the facts were stipulated, and those facts are so
found. At the time the petition was filed, petitioner was a
legal resident of Houston, Texas.3
Although petitioner was an employee during the year at
issue, the principal issues in this case arise from two self-
employed trade or business activities petitioner was engaged in
that year. Petitioner claimed losses from both of these
activities that respondent challenges.
Petitioner has an M.B.A. degree from Harvard University and
is a certified public accountant. Since 1983, he has been
involved in various business ventures as an investment and
3 Sec. 7491(a) shifts the burden of proof to the
Commissioner with regard to any factual issue relevant to
ascertaining the taxpayer’s liability. Sec. 7491(a)(2) limits
application of this rule to an issue or issues for which the
taxpayer has complied with the requirements for substantiation of
any item, has maintained all records with respect to such items,
and has cooperated with reasonable requests by the Secretary for
witnesses, information, documents, and interviews, etc.,
regarding matters at issue. In this case, the burden of proof
does not shift to respondent because petitioner’s failure to
cooperate with respondent’s counsel in submitting records as to
the matters at issue resulted in the issuance of an order by the
Court on Oct. 6, 2004, ordering the parties to stipulate and
exchange documents with each other to enable this case to proceed
to trial. As to the additions to tax, the burden of production
is on respondent. Sec. 7491(c).
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