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Friday, January 10, 2003


Dennis J. Kraus, a bakery deliveryman who was provided a uniform, truck, gasoline, and route by his principle and was paid based on a salary plus a commission on goods delivered, whether or not paid for, thought he was an independent contractor. He listed his income on a Schedule C, and took deductions for goods returned and a home office, keeping records on Quicken but not saving receipts. IRS said he was an employee, disallowed all the deductions, and charged a negligence penalty.
Held: Kraus is wrong about being an employee, and his deductions for goods returned and for the home office are disallowed. Kraus was also wrong about not needing to keep receipts. But he still gets the deductions he would have been allowed from Schedule A, and the penalty was disallowed. The IRS continually claims that citizens are negligent just to be wrong, but that they can not be wrong unless they are intentionally malicious, but fortunately the Tax Court usually sees through this.
The Tax Court here declined to rule on the burden of proof issue because they claimed they decided all issues base on a preponderance of the evidence. This renders the burden of proof statutes superfluous as a practicality. Maybe I am wrong, for I just started this project, but my guess is that Tax Court will always claim to have decided based on a preponderance of the evidence. As I read these cases, I will be interested to see how many times Tax Court admits they can not decide between the IRS and the taxpayer and rules based on the burden of proof.

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