- 45 -
supra at 283; 1B Moore, Moore's Federal Practice, par. 0.441 [3.-
2] at 527-535 (2d ed. 1985). Thus, petitioner's reliance on
Gammill and Divine is misplaced.
4. Conclusion--Collateral Estoppel Applies
We conclude that petitioner is collaterally estopped from
contesting the factual findings of the bankruptcy court in In re
Resyn Corp., 81-2 USTC par. 9808 (Bankr. D.N.J. 1981).
Collateral estoppel establishes all of the facts found by the
bankruptcy court for purposes of the instant case. However, our
findings of fact are also fully supported by the record in this
case. The findings of fact by the bankruptcy court provide an
alternative basis for many of those facts.
C. Whether Respondent's Determination Is Arbitrary
Respondent's determination is generally presumed to be
correct. Welch v. Helvering, 290 U.S. 111, 115 (1933).
Petitioners contend that respondent's determination is arbitrary
and should not be presumed to be correct because respondent had
no rational basis for determining that petitioner received
constructive income from Chemical Traders and Polymer which he
diverted from Resyn. We disagree.
A notice of deficiency that lacks a rational basis is
arbitrary and not presumed to be correct. Llorente v.
Commissioner, 649 F.2d 152, 156 (2d Cir. 1981), affg. in part and
revg. and remanding in part on this issue 74 T.C. 260 (1980). To
show that the Commissioner acted rationally, the record must link
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