Kim Beauchamp - Page 10

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          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).                                                                 



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