- 18 -
unreported gross receipts for each year in issue.
The existence of unreported gross receipts, however, does
not demonstrate that petitioner underpaid his tax for each of the
years in issue. Indeed, gross receipts from sales must be
reduced by cost of goods sold to determine gross income from
sales. Sec. 1.61-3(a), Income Tax Regs. Moreover, gross income
from sales must be reduced by all deductible expenses to
determine taxable income from sales. Sec. 63(a). Accordingly,
an underpayment of tax resulting from unreported gross receipts
from sales is possible only if such unreported gross receipts are
not exceeded by cost of goods sold and deductible expenses. See,
e.g., Franklin v. Commissioner, T.C. Memo. 1993-184.
In the instant case, petitioner contends that he did not
underpay his tax for the years in issue because the profits from
unreported sales of alcoholic beverages at the Bullfrog were used
to pay bands that performed at the Bullfrog.
The general rule is well settled that, even in criminal
cases where the Government bears the greater burden of proof,
i.e. beyond a reasonable doubt, "'evidence of unexplained
receipts shifts to the taxpayer the burden of coming forward with
evidence as to the amount of offsetting expenses, if any.'"
United States v. Garguilo, 554 F.2d 59, 62 (2d Cir. 1977)
(quoting Siravo v. United States, 377 F.2d 469, 473 (1st Cir.
1967)); United States v. Campbell, 351 F.2d 336, 339 (2d Cir.
1965); Gleave v. Commissioner, T.C. Memo. 1997-276; Franklin v.
Commissioner, supra.
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011