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adjustments for Schedule C “Other Expenses”, Schedule C
depreciation and section 179 expenses, and self-employment tax.
Although no dividends or capital gains or losses were
reported on petitioners’ joint return for 2004, the American
Funds of the Investment Company of America reported in a
statement issued to petitioners a capital gain of $246.67 and
total dividends of $358.90 for 2004.
Discussion
Generally, the Commissioner’s determinations in a notice of
deficiency are presumed correct, and the taxpayer has the burden
of proving that those determinations are erroneous. See Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). In some
cases the burden of proof with respect to relevant factual issues
may shift to the Commissioner under section 7491(a). Petitioners
did not present evidence or argument that they satisfied the
requirements of section 7491(a). Therefore, the burden of proof
does not shift to respondent.
Unreported Schedule C Gross Receipts
Section 6001 requires a taxpayer to maintain sufficient
records to allow for the determination of the taxpayer’s correct
tax liability. Petzoldt v. Commissioner, 92 T.C. 661, 686
(1989). If a taxpayer fails to maintain or does not produce
adequate books and records, the Commissioner is authorized to
reconstruct the taxpayer’s income. See sec. 446; Petzoldt v.
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Last modified: March 27, 2008