- 13 -
sioner, 92 T.C. 661, 700 (1989). The Commissioner must prove
only that an underpayment exists, and not the precise amount of
such underpayment. DiLeo v. Commissioner, 96 T.C. 858, 873
(1991), affd. 959 F.2d 16 (2d Cir. 1992); Petzoldt v. Commis-
sioner, supra at 699-700. When an allegation of fraud is inter-
twined with reconstructed unreported income, as is the case here
with respect to a portion of the underpayment for each of the
years at issue, the Commissioner may satisfy such burden by
establishing an underpayment by either: (1) Proving a likely
source of the unreported income or (2) disproving the nontaxable
source(s) that the taxpayer alleges for the unreported income.
Parks v. Commissioner, supra at 661.
Petitioner understated its gross receipts in its 1990 return
and 1991 return by $49,327 and $209,252,7 respectively. In
addition, petitioner did not report as income in its 1990 return
and/or its 1991 return the following: (1) The forgone interest
on Mr. Duncan’s outstanding loan balance with petitioner for 1990
and 1991; (2) petitioner’s 1990 amount realized; and (3) peti-
tioner’s 1991 check amount. Furthermore, the deductions peti-
tioner claimed in its 1990 return of $9,610 and $25,000, respec-
tively, for “outside services” and contributions to petitioner’s
pension and/or profit sharing plan were improper.
In Mr. Duncan’s March 31, 1998 plea agreement, Mr. Duncan
7See supra note 4.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011