The recent Tax Court case of Kohout v. Commissioner addresses several common evidentiary issues in the context of tax disputes.  A summary, chart, or calculation to prove the content of voluminous records may be appropriate and admissible, but the Tax Court, as seen in the Kohout opinion, is quite comfortable with the financial data in, for example, bank statements that are 58-pages in length. A summary of voluminous records must be an accurate compilation of the underlying data; thus, a constructed summary of reconstructed accounting data is a recipe for evidence that lacks credibility or that will be deemed inadmissible by the Tax Court. And, an accounting “reconstructionist” may attempt to reconstruct a taxpayer’s return through the taxpayer’s testimony or word, but the underlying records—bank statements and evidence of transfers—are a better and more probative source for the substance of a taxable transaction.  We dive into more detail below:

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