- 10 -
correct, and the taxpayer bears the burden of proving that those
determinations are erroneous. Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933); Durando v. United States, 70 F.3d 548,
550 (9th Cir. 1995). The U.S. Court of Appeals for the Ninth
Circuit, to which an appeal of this case would lie, has held that
in order for the presumption of correctness to attach to the
notice of deficiency in unreported income cases,6 the
Commissioner must come forward with substantive evidence
establishing "some evidentiary foundation" linking the taxpayer
to the income-producing activity, Weimerskirch v. Commissioner,
596 F.2d 358, 361-362 (9th Cir. 1979), revg. 67 T.C. 672 (1977),
or "demonstrating that the taxpayer received unreported income",
Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th Cir. 1982); see
also Rapp v. Commissioner, 774 F.2d 932, 935 (9th Cir. 1985).
Once there is evidence of actual receipt of funds by the
taxpayer, the taxpayer has the burden of proving that all or part
of those funds are not taxable. Tokarski v. Commissioner, 87
T.C. 74 (1986). The Commissioner must take into account any
nontaxable sources of deposits of which the Commissioner is aware
in determining the portion of the deposits that represents
6 Although Weimerskirch v. Commissioner, 596 F.2d 358 (9th
Cir. 1979), revg. 67 T.C. 672 (1977), was an unreported income
case regarding illegal source income, it is now well established
that the Court of Appeals for the Ninth Circuit applies the
Weimerskirch rule in all cases involving the receipt of
unreported income. See Edwards v. Commissioner, 680 F.2d 1268,
1270-1271 (9th Cir. 1982); Petzoldt v. Commissioner, 92 T.C. 661,
689 (1989).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011