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In cases of unreported income, the Court of Appeals for the
Ninth Circuit, to which an appeal in this case apparently would
lie absent a stipulation to the contrary, requires that the
Commissioner provide a minimal evidentiary foundation connecting
the taxpayer to the unreported income before the presumption of
correctness attaches to respondent’s determination. See Rapp v.
Commissioner, 774 F.2d 932, 935 (9th Cir. 1985); Weimerskirch v.
Commissioner, 596 F.2d 358, 360-361 (9th Cir. 1979), revg. 67
T.C. 672 (1977); Petzoldt v. Commissioner, 92 T.C. 661, 687-691
(1989); Residential Mgmt. Servs. Trust v. Commissioner, T.C.
Memo. 2001-297; Johnston v. Commissioner, T.C. Memo. 2000-315.
Once the Commissioner has met this initial burden of production,
the taxpayer must establish by a preponderance of the evidence
that the Commissioner’s determination is arbitrary or erroneous.
Rapp v. Commissioner, supra; Petzoldt v. Commissioner, supra;
Residential Mgmt. Servs. Trust v. Commissioner, supra. We defer
to the Court of Appeals for the Ninth Circuit’s evidentiary
requirement under the doctrine set forth in Golsen v.
Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.
1971). However, we note that the Court of Appeals for the Ninth
Circuit’s rule does not automatically shift the burden of proof
regarding the unreported income to respondent, as alleged by the
Gouveias.
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