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E. The Present Litigation
On March 22, 2004, petitioners timely filed a petition with
this Court seeking review of the notice of deficiency and
alleging that they had expense documentation that would reduce
the amount of the deficiency. On April 27, 2004, respondent’s
answer was filed. The trial in this case was set for the Court’s
January 24, 2005, Los Angeles, California, trial session, and
both parties appeared and were heard.
OPINION
Section 61(a) defines gross income for purposes of
calculating taxable income as “all income from whatever source
derived”. Respondent has determined that petitioners received
unreported income from Life Bank, Alpa, Geylikman, Svetella, and
the Los Angeles County Auditor Controller.
The Commissioner’s deficiency determination is normally
entitled to a presumption of correctness, Rapp v. Commissioner,
774 F.2d 932, 935 (9th Cir. 1985), and the burden of proving the
determination incorrect generally rests with the taxpayer, Rule
142(a). However, when a case involves unreported income and that
case is appealable to the Court of Appeals for the Ninth Circuit,
barring a stipulation to the contrary, the Commissioner’s
determination of unreported income is entitled to the presumption
of correctness only if the determination is supported by some
evidence linking the taxpayer to an income-producing activity.
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