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G. Discovery
Before trial, on July 7, 2006, respondent served
interrogatories on petitioners, asking them to list every item
claimed as an expense deduction on the 2001 Schedule C. Perez
prepared petitioners’ responses to those interrogatories. For
every item except depreciation that respondent disallowed in the
notice of deficiency, petitioners’ interrogatory responses
reflected deduction amounts greater than the amounts reported on
the Schedule C.
H. The Seizures
On November 30, 2005, agents of respondent’s Criminal
Investigation Division (CID) executed simultaneous search
warrants at petitioner’s business and at the payroll company.
From November 30, 2005, through the trial in this case, CID has
retained originals or copies of all electronic or paper records
seized pursuant to the search warrants. At the time of the
seizures, CID created an inventory of the seized paper documents.
The seized paper records consist of approximately 85 boxes of
materials seized from B&B Construction and 40 boxes of materials
seized from the payroll company.
OPINION
The burden of proof is on petitioners to show that
respondent’s determinations set forth in the notice of deficiency
are incorrect. See Rule 142(a)(1); See Welch v. Helvering, 290
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