Earl J. Lollis and Ruth Lollis v. Commissioner of Internal Revenue

Appeal from a decision of the Tax Court, which is reported at P-H Memo T.C. H 76,-015.

Most of the facts were stipulated. They are fully outlined in the Tax Court’s decision, and we do not repeat them here. The taxpayers do not attack most of the deficiencies assessed. We consider briefly the four arguments that they do make.

First, they argue that the Tax Court should have allowed more than 40% of certain expenditures as being for ordinary and necessary business expenses. The expenditures are evidenced only by debits against the bank account in which most of the receipts from the taxpayers’ business were deposited. However, there is no evidence whatever as to what was done with the withdrawn moneys. The Tax Court allowed 40% of the amounts as business expense. The short answer to the taxpayers’ argument is that they cannot sustain their burden of proof. As the court said in Cohan v. C. I. R, 2 Cir., 1930, 39 F.2d 540 , 543 — 44:

(Emphasis added.)

The best that taxpayers could offer was testimony by their accountant that in the years 1967 through September 30, 1973, the average cost to the business of goods sold was 70 percent. The accountant also produced, over the…