Bill McDonald - Page 13

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          (1974); Weimerskirch v. Commissioner, supra.  We have looked                
          behind the notice in those rare instances where respondent relied           
          upon a "'naked' assessment without any foundation whatsoever".              
          United States v. Janis, 428 U.S. 433, 441 (1976); Jackson v.                
          Commissioner, supra at 401.                                                 
               In Weimerskirch v. Commissioner, supra, and Dellacroce v.              
          Commissioner, 83 T.C. 269 (1984), the Government possessed no               
          evidence linking the taxpayers to illegal income.  In Dellacroce,           
          we held the notice of deficiency to be arbitrary because the                
          reconstruction of income did not link the taxpayer to the income-           
          generating activity.                                                        
               In this case, by contrast, there is ample evidence,                    
          including numerous concessions by petitioners, reflecting that              
          petitioners’ income was not fully reported.  Respondent has shown           
          a clear and direct linkage to sources of unreported income in               
          this case.  See Adamson v. Commissioner, 745 F.2d 541 (9th Cir.             
          1984), affg. T.C. Memo. 1982-371.  Accordingly, we find that                
          respondent’s determination is not arbitrary.                                
               Income Reconstruction--Where, as here, taxpayers have failed           
          to provide adequate records substantiating their income, an                 
          indirect method may be used to reconstruct their income.  Holland           
          v. United States, 348 U.S. 121 (1954).  Petitioners bear the                
          burden of proving that the determinations made by respondent in             
          the notices of deficiency are erroneous.  Rule 142(a); Cracchiola           
          v. Commissioner, 643 F.2d 1383 (9th Cir. 1981) (citing Welch v.             
          Helvering, 290 U.S. 111 (1933)), affg. per curiam T.C. Memo.                

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