L. T. Patriot
P.O. Box 1234
Greenville, SC 29606
April 19, 2007
Lynn M. Baker, SC DOR
Office of the General Counsel
301 Gervais St, PO Box 12265
Columbia, SC 29211
RE: L.T. Patriot: Docket #12-ALJ-34-5678-CC
Dear Ms. Baker,
You sent me your Respondent’s Exchange of Evidence dated April 13, 2007. Am I supposed to do anything in response to this?
Your documents do not show the amount of state withholding. Please send me a copy of the W-2 form that my employer sent to DOR. The data base printout from the IRS is unreadable because the right margin was overstated by about an inch and cut off the column. Just send me another copy with the full right column.
You are listing $22,000 of business expense reimbursement as compensation for services. Also you failed to list my un-reimbursed business expenses in the amount of $37,000. If you prefer, we can just figure that half of my gross from my employers went for expenses when I worked out of town. (Incidentally all of my work for that year was a long way from SC.) That means that the remaining half of my payroll checks would be net receipts and considered taxable by your agency.
The Cohen v. CIR case shows that in tax court, you can use reasonable figures, instead of figures conjured by the IRS that cannot be correct. You can also reconstruct lost paperwork to substantiate your deductions and business expenses.
Further, you can claim a percentage of business expenses and profit for a business enterprise, even if you have no records to substantiate your business expenses. For example, a plumbing subcontractor could claim as expenses 60% of gross receipts from the form 1099s that the IRS received from the contractors.
The 9th Circuit Court ruled in Cohen v. CIR, 266 F 2d 5(1959):
''* * * We think our only proper course is to approach the problem indirectly by analysis of the record in the light of the principles established in Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930). Our objective will be, after resolving any reasonable doubts against petitioner, to reconstruct his gross income as betting commissioner at a figure which in our judgment it would be unlikely to exceed in fact. (Petitioner, it is clear, has failed to establish a lesser amount.)''
The purpose of the DOR is to collect taxes, not to brow beat hard working citizens who are unable to keep records because they struggle to make a living and work hard at distant locations. Due to my occupational travels, I am unable to maintain all the records that you seek. However, we all know that I did incur large expenses for out of town work. Let us figure out what the law says I owe so I can start paying.
I request an out of court settlement. Please give me by business expenses, waive penalties, and I will sign what you want.
Yours,
L.T. Patriot
CC: Judge SC ALC