UNITED STATES TAX COURT
                                   

Max,                             )
              Petitioner,        )
                                 )
    V                            )    Docket #2755X-XX
                                 )
COMMISSIONER OF INTERNAL REVENUE )
              Respondent,        )

REPLY TO ANSWER

Replying to Answer of the Commissioner, Petition states:

1. Petitioner requests out of court settlement in this case.

2. Petitioner is prepared to state under oath that I had dependents, deductions for donations to church, charities, etc.

3. Petitioner incurred tax advice expenses.

4. Petitioner may be eligible for the telephone tax refund.

5. The 1099’s held by the IRS are not correct and may be the result of identity theft by illegal aliens.

6. Petitioners’ main tax deductions are real estate business expenses and rental real estate

expenses.

7. Petitioner has no documentation to show his expenses.

8. Taxes listed on the 90-day letter are incorrect and should be eliminated or reduced. A corresponding amount of the interest and penalties should be eliminated. Under the Cohen case, below, I can give a correct estimation of business expenses. Taxing gross income is unauthorized.

9. The Cohen case shows that in Tax Court, I can use reasonable figures, instead of figures that cannot be correct. Petitioner can also reconstruct his lost paperwork to substantiate his deductions and business expenses. Petitioner can claim a percentage of business expenses and profits for a business enterprise, even with no records to substantiate those business expenses. For example, a plumbing subcontractor could claim as expenses 60% of 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 Cohen 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.)”

Certificate of Service: I hereby certify that on this date I sent a proper copy to opposing counsel.

_________________________            Date: February 8, 2008
Max P.
Vernonia , Oregon