BAILEY v. COMMISSIONER OF INTERNAL REVENUE
T.C. Memo. 2012-96
United States Tax Court.
Filed April 2, 2012.
A. Mr. Bailey's position
The primary counter-evidence that Mr. Bailey produced at trial to support his position and contradict the agent on these miscellaneous adjustments was Quicken registers and cashflow reports for the 1993 through 2001 tax years. That is, he did not offer receipts or other transactional documents to substantiate the items on his return; he simply relied on his secondary Quicken records.
For several of the years he lacked even those records; but on the eve of trial in 2009, Mr. Bailey was finally able to "unlock" password-protected copies of his Quicken database, from which he made new printouts for all nine years. The data on the three available printouts made earlier (printed in October 1997 for tax year 1996, in October 2000 for tax year 1999, and in October 2001 for tax year 2000) and the data on the 2009 printouts for those same three years are not identical and cannot be correlated with each other. We do not conclude that the later-produced printouts constitute an attempt to falsify the data; we presume that Mr. Bailey presented them in good faith; but we find them unreliable. The differences between the 2009 printouts and the prior ones apparently arise from post-2002 data entries, so it is clear that the entries were not made contemporaneously during the years at issue (1993-2001). Rather, they were evidently made after 2002 and before the later reports were printed in 2009. In his testimony Mr. Bailey expressed the belief that the database used in 2009 might actually be an earlier version, not a later version, of the database that produced the printouts in 2002, but we cannot tell whether that is correct. The later printouts may reflect entries made in good faith as intended corrections of the data; but the record does not show—and Mr. Bailey does not even claim to know—who made the corrections nor the information on which the corrections were based.
And in any event, the corrected data (if they are correct) on the later printouts (if they really are later) do not correspond to the tax returns. Mr. Bailey's arguments on brief often amount to demonstrating that amounts in dispute are duly reflected in the 2009 printouts; but if he would thus rely on a later printout, then he would have to show that a disputed item of income that does appear on that printout also appears on the return, or that expenses that appear on the printout are not among those that the notice of deficiency allowed and did not adjust. To show that fees were duly reported on the 2009 printout is to prove only that they should have been reported on Mr. Bailey's tax returns; that showing does not prove that they actually were reported.
Rather than correlating the 2009 printouts with the returns, Mr. Bailey simply criticizes the Commissioner's position for failing to take into account the 2009 printouts. The Court has attempted to puzzle through Mr. Bailey's factual assertions and determine whether the 2009 printouts can be reconciled with the returns and correlated to the notices of deficiency, but the record does not include sufficient information to make possible such comparisons. That is, Mr. Bailey has largely failed in his burden of proof. Mr. Bailey did not show how the 2009 Quicken printouts support or tie to the amounts reported on his returns.
We now address the particular adjustments that the IRS made: