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Appendix
The Federal Rules of Evidence generally apply to proceedings
in this Court. Sec. 7453; Estate of Shafer v. Commissioner, 80
T.C. 1145, 1151 (1983), affd. 749 F.2d 1216 (6th Cir. 1984).
Issue (a). Exhibits 6 and 7, Income Tax Examination Changes and
No-Change Letter For 1989
Respondent objects to the admission of the 1989 income tax
examination report and no-change letter. Citing Gordon v.
Commissioner, 63 T.C. 51, 78 (1974), respondent maintains that
the fact that there was no change to petitioner's 1989 reported
income is irrelevant to the issues in this case. We disagree.
Rule 401 of the Federal Rules of Evidence provides that a
statement is relevant if it has "any tendency to make the
existence of any fact that is of consequence to the determination
of the action more probable or less probable than it would be
without the evidence." In Gordon, we agreed with the
Commissioner that the amount of unreported wagering income
determined by the Commissioner in a specific year was not
dependent upon the taxpayer's activities in earlier years. While
the years at issue in the case at hand are 1986 and 1991, we
also consider petitioner's activities during the intervening
years to determine whether petitioner carried on a trade or
business in 1991.
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