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Tuesday, March 04, 2003

 


Tax Court denied Stephen P. Pacileo�s claim of theft losses for property �stolen� (probably sold) by his wife when they separated. Tax Court also denied Mr. Pacileo�s claim for losses related to a business he ran out of his garage where the documentation of the business was non-existent and a he claimed in a deposition in his divorce proceedings that he never ran any business out of his garage. Finally, Tax Court allowed an underpayment penalty due to negligence on these two matters. I think Tax Court was wrong regarding the penalty to the extent it resulted from his claimed theft losses. Right or wrong, he probably honestly felt like he was robbed, and I do not think this was �negligence�. Tax Court was probably right about the schedule C deductions, including the resulting penalty, based on the evidence. But I suspect the truth is that he was engaged in a business, but he conducted it entirely in cash and was less than forthcoming about this in his divorce proceedings against a wife who �stole� so much other stuff from him. But even if my suspicions are accurate, the lack of records and his credibility history would lead me to question the accuracy of his claimed income and deductions to the IRS.



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