Opinion ID: 481084
Heading Depth: 1
Heading Rank: 2

Heading: the tax court's findings of fact and opinion

Text: 5 Amey and Monge timely filed their petition to the Tax Court to challenge the correctness of the Commissioner's notice of deficiency. Thereafter, petitioners filed a plethora of motions in the Tax Court seeking concessions from the respondent Commissioner. Before, during and after trial, in part pursuant to an order of the Tax Court judge for the parties to seek agreement, respondent conceded that petitioner was entitled to a substantial part of the amount which he had previously disallowed, cutting the deficiencies nearly in half. 6 The case was tried before the Tax Court without any indication on the part of petitioner that the contention which it now makes before this Court was an issue to be decided by the Tax Court. That issue was whether there was proof sufficient to establish the fact that the deficiency notice was excessive and arbitrary and if there was, then the burden should be shifted to the Commissioner to prove the correctness of the remaining disallowed business expenses. Clearly, in the absence of any notice from petitioners of their right to have the burden shifted to the Commissioner, the Tax Court proceeded on the assumption that the burden of proof was on the taxpayer. The entire opinion dealing with deductions is short: 7 On its corporate return for taxable years 1977 and 1978, petitioner, Amey and Monge, Inc., claimed deductions in the amount of $114,006.58 and $77,668.55 17 respectively, for salaries and wages, repairs, rents, taxes, interest, contributions, depreciation, advertising and other deductions. 8 17. After concessions by the parties, the amount of deductions in dispute is $49,077.28 and $59,582.92 for 1977 and 1978, respectively. 9 Section 162(a) allows as a deduction all ordinary and necessary business expenses in carrying on a trade or business. Petitioner has the burden to prove that it is entitled to such a deduction. The burden of clearly showing the right to a claimed deduction is on the taxpayer. Interstate Transit Lines v. Commissioner, [43-1 USTC par. 9486], 319 U.S. 590, 593 [63 S.Ct. 1279, 1281, 87 L.Ed. 1607] (1943); Rule 142, T.C. Rules of Practice and Procedure. 10 Respondent maintains that petitioner, Amey and Monge, Inc., has not met its burden of proof in this instance. As we have previously stated, the proof of any deductions other than those conceded by respondent is not precise, but the record is sufficient to show that Amey and Monge, Inc., is entitled to some business expense deductions other than the salaries and wages conceded by respondent. Based on the record as a whole and using our best judgment, we conclude that for 1977 Amey and Monge, Inc., is entitled to deduct in addition to the amounts conceded by respondent the following: 11 Truck and automobile expenses ........... $2,000.00 Utilities (which is the only rental expense we find) ....................... 1,800.00 Accounting expense ......................... 610.00 Miscellaneous expenses, including blueprints, business registrations, office supplies, insurance and similar items .......................... 4,605.29 Payroll taxes ............................ 4,818.62 ---------- Total .............................. $13,833.91 12 The evidence is even more sparse for 1978 than for 1977. However, based on the record and considering the items shown as deductible in 1977, we conclude that Amey and Monge, Inc., is entitled to the following deductions in addition to the salaries conceded by respondent: 13 Accounting and legal expenses ......... $ 600.00 Automobile and truck expenses .......... 1,893.39 Insurance ................................ 100.00 Payroll taxes .......................... 1,000.00 Miscellaneous, including blueprints, office expenses and similar items .... 3,000.00 Rent, including utilities ............. $1,800.00 --------- Total ............................. $8,393.39 14 49 T.C.M. at 288. 15 From this decision of the Tax Court, Amey and Monge filed a timely notice of appeal.