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A taxpayer must establish the basis of his or her stock for
purposes of determining the amount of gain he or she must
recognize. “Proof of basis is a specific fact which the taxpayer
has the burden of proving.” O’Neill v. Commissioner, 271 F.2d
44, 50 (9th Cir. 1959), affg. T.C. Memo. 1957-193. Internal
Revenue Agent Robert Sullivan and respondent both specifically
requested that petitioners provide information about Mr. Wright’s
stock basis in Wright & Associates.20 Petitioners, despite Mr.
Wright’s extensive experience with accounting and tax matters,
failed to comply.
Petitioners received $64,601, $29,405, and $87,864.64, as
distributions from Wright & Associates in 1999, 2000, and 2001,
respectively. Respondent determined that to the extent the
distributions exceeded basis, petitioners were required to
include them in their income in the amounts of $8,774, $21,283,
and $44,151, for 1999, 2000, and 2001, respectively.
20Respondent served on petitioners interrogatories and a
request for production of documents on Aug. 26, 2005, requesting,
inter alia, that petitioners provide calculations of their basis
in Wright & Associates from its incorporation through 1998.
Petitioners failed to respond, and respondent filed with the
Court on Sept. 29, 2005, a motion to compel production of
documents and a motion to compel responses to respondent’s
interrogatories. The Court, by orders dated Sept. 30, 2005,
granted both of respondent’s motions to compel. Petitioners’
responses to the orders to compel failed to provide the requested
calculations or documents. Petitioners’ response to respondent’s
request for production stated that “Petitioners have no records
prior to 1999.”
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