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The Litigation Side of Forensic Accounting Copyrighted 2001 D. Larry Crumbley, CPA, Cr.FA, CFD KPMG ... - page 147 / 275

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© D.L. Crumbley

In Frank J. Laureys, Jr., 92 T.C. 101 (1989), the IRS offered the testimony of Dr. Bradford Cornell, a professor of finance and economics at UCLA, to demonstrate that taxpayer was never “at risk” as to his option trading activities. About his proffered testimony, Tax Court Judge Mary Ann Cohen commented:

We agree with petitioner that the factual premises of Dr. Cornell’s report are unreliable and that neither his testimony nor his qualifications assist in determining petitioner’s purpose in engaging in the transactions in issue….

[W]e do not believe that the type of economic analysis set forth in Dr. Cornell’s report is relevant to the type of risk covered by section 465(b)…. Dr. Cornell’s testimony is tainted by his perception that, from an economic standpoint, wash sales are not legitimate.

Source: B.J. Raby and W.L. Raby, “Reasonable Compensation, Expert Witnesses, and the Tax Practitioner,” Tax Notes, September 15, 2003, pp. 1417-1418.

Rejecting Experts

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