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Petitioner did not make estimated tax payments and did not
file individual Federal income tax returns for 1987, 1988, and
1989. Respondent received information returns from several
payors indicating that petitioner had earned self-employment
income in 1987, 1988, and 1989 in the respective amounts of
$9,525, $15,223, and $20,551. On April 22, 1994, respondent
issued to petitioner a notice of deficiency for the years at
issue.
Respondent reconstructed petitioner's income during the
years in issue using either the information returns or Bureau of
Labor Statistics. The Bureau of Labor Statistics represent
estimates of petitioner's annual living expenses. For 1987,
1988, and 1989, the respective amounts from the Bureau of Labor
Statistics are $14,693, $15,671, and $16,814. For the years in
issue, respondent determined that petitioner had self-employment
income equal to the greater of petitioner's annual living
expenses (as determined from the Bureau of Labor Statistics) or
the amount of self-employment income reported on the information
returns. Thus, respondent determined that petitioner had self-
employment income in 1987, 1988, and 1989, in the respective
amounts of $14,693, $15,671, and $20,551.
Discussion
1. Reconstruction of Income
Where, as here, a taxpayer fails to maintain adequate books
and records as required by section 6001, the Commissioner may
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