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presumed correct, and taxpayers have the burden of proving that
the determinations are incorrect. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933). Under certain
circumstances, however, section 7491(a) may shift the burden to
the Commissioner with respect to a factual issue affecting
liability for tax. Petitioners did not present evidence or
argument that they satisfied the requirements of section 7491(a).
Therefore, the burden of proof does not shift to respondent.
Taxpayers are required to maintain records that are
sufficient to enable the Commissioner to determine the correct
tax liability. See sec. 6001; sec. 1.6001-1(a), Income Tax Regs.
When a taxpayer fails to keep records, or the records of income
are inadequate, the Commissioner may calculate the taxpayer’s
income in any manner that clearly reflects the income. Sec.
446(b); Meneguzzo v. Commissioner, 43 T.C. 824, 831 (1965). The
Commissioner’s method of reconstructing a taxpayer’s income need
only be reasonable in the light of all the surrounding
circumstances. Schroeder v. Commissioner, 40 T.C. 30, 33 (1963).
Petitioner testified that he had no records of the business
because one of his sons moved back into the family home and
“threw cardboard boxes and everything out and the receipts [sic]
that I had my taxes in, and I stated that to the Internal Revenue
examiner”. The examiner testified that during the examination
petitioner described his landscaping business as a cash business
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Last modified: November 10, 2007