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As support for this argument, respondent contends that the income
petitioner received from Besco was generated from kickback
payments based solely on purchases ASI's paint department made
from Besco. It follows, respondent's argument continues, that
petitioner did not maintain a business the nature of which would
have given rise to the expenses claimed by petitioner.
Respondent rejects petitioner's contention that such income was
generated in the form of commissions received in exchange for
various activities that petitioner performed while advancing
Besco's interests. Despite petitioner's fleeting recognition of
this formulation of respondent's argument, petitioner limits his
argument to the contention that respondent is relying on
petitioner’s failure to substantiate the expenses at issue in
order to establish that an understatement exists.
Respondent has clearly and convincingly established that an
underpayment of tax exists. An underpayment can be accomplished
by an overstatement of deductions. Estate of Temple v.
Commissioner, 67 T.C. 143, 161 (1976). The testimony elicited at
trial demonstrates that the income petitioner received from Besco
during the years at issue was derived exclusively from
petitioner's status as superintendent of ASI's paint department;
petitioner was not furthering Besco's interests outside ASI in
any material fashion. As superintendent of the paint department,
petitioner was in a position to influence the department's
purchasing decisions, particularly decisions involving suppliers.
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