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royalty income by using an indirect method of income
reconstruction.
Respondent determined petitioner's royalty income for 1983
by taking petitioner's 1984 royalty income, as shown in table 6,
supra, and adjusting that figure downward according to the
Consumer Price Index. Respondent thereby concluded that
petitioner's 1983 royalty income was $64,469.
Firstly, we note that petitioner has not suggested that
respondent's use of the Consumer Price Index method of royalty
income reconstruction for 1983 was unreasonable. Secondly,
petitioner acknowledged having a substantial amount of royalty
income in 1983--he reported $33,599 of royalty income on his tax
return for that year--and so cases such as Llorente v.
Commissioner, 649 F.2d 152 (2d Cir. 1981), affg. in part and
revg. in part 74 T.C. 260 (1980), do not lead to any burden of
proof being imposed on respondent on this point in the instant
case. See, e.g., Williams v. Commissioner, 999 F.2d 760, 764
(4th Cir. 1993), affg. T.C. Memo. 1992-153; Tokarski v.
Commissioner, 87 T.C. 74, 76 (1986). Thirdly, although one might
fairly dispute whether a cost-of-living adjustment based on 1984
is the best way to estimate petitioner's 1983 royalty income, we
note that (a) the royalty income adjustment for 1983 is very
close in amount to the royalty income adjustment for 1984, which
was derived from a review of specific Form 1099 information (see
supra table 6), and (b) mathematical exactitude is not required
of respondent. Petzoldt v. Commissioner, 92 T.C. at 693-694.
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