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To determine a taxpayer's Indiana adjusted gross income, Indiana begins with a taxpayer's federal taxable income, subject to modifications provided under IC § 6-3-1-3.5(b). During the hearing, Taxpayer provided documents modifying Taxpayer's claimed expenses pertaining to depreciation of certain real and personal property. Taxpayer's claims rely on adjustments to federal adjusted gross income allowed under Sections 167, 168, and 179 of the Internal Revenue Code.
While the information provided by Taxpayer during the hearing was insufficient to demonstrate that the total depreciation deduction should be adjusted to Taxpayer's claimed amounts, the information does show that some of Taxpayer's claimed expenses could qualify for a deduction from Taxpayer's gross income. However, the Taxpayer has not provided information sufficient to support Taxpayer's depreciation expense claims related to certain items, such as a pontoon boat, jet skis, televisions, and a "book balance" line item. Therefore, the Department sustains Taxpayer's protest in part, to the extent that the information Taxpayer provided during the hearing for certain documented expenses attributable to each of Taxpayer's two buildings supports an increase in claimed deductions based upon depreciation and amortization. However, the Department denies Taxpayer's protest to the extent that the information provided by Taxpayer not only does not account for all of the depreciation taken on the federal return, but also fails to adequately justify deduction of amounts attributable to the above-mentioned items.
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Taxpayer has provided sufficient documentation to demonstrate the possible validity of some of Taxpayer's expense deductions. Therefore, the Department sustains Taxpayer's protest in part, subject to audit verification, for the NOL carryback of some of Taxpayer's claimed expenses, but denies in part as to the total NOLs claimed on Taxpayer's Schedule IT-20NOL statements.
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Taxpayer protests the Department's imposition and assessment of two penalty amounts added to Taxpayer's income tax liabilities for the Tax Years.
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While the Department commends Taxpayer on its efforts to maintain its own working relationship with its accounting firm, Taxpayer's failure to provide documentation in response to Department's numerous requests during the Department's audit did not meet the duty of reasonable care expected of a taxpayer.
Further, if the taxpayer fails to pay the full amount of tax due on the tax return on or before the due date of the return, or make estimated income tax payments pursuant to IC § 6-3-4-4.1, the tax due is subject to penalty and interest. Taxpayer failed to file returns for three of the Tax Years. Taxpayer did not file those returns until it received the Department's notice. Taxpayer has not provided information or explanation sufficient to show reasonable cause for the abatement of negligence or underpayment penalties.
