Charles A. Dennis and Alison M. Dennis - Page 10

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          addition to the information return.  See Hardy v. Commissioner,             
          T.C. Memo. 1997-97.                                                         
               The income in question in this case was earned from Doug               
          Priester in the form of a discount.2  Petitioner testified on               
          cross-examination that his only relationship with Doug Priester             
          was to buy insurance from him.  Petitioner denied that the                  
          discount received from Mr. Priester was $3,577, but then admitted           
          that he did not know the exact size of the discount, a tacit                
          admission that there was a discount.  Petitioner has not                    
          substantiated the size of the discount, but testified that he               
          would have done so had he received a Form 1099 from Priester.               
               Petitioner, as the purchaser of the insurance, presumably              
          had within his control evidence concerning the insurance                    
          policies, such as the policies themselves, the price paid for               
          them, and their fair market value.  Petitioner failed to                    
          introduce such evidence or offer an explanation as to why he                
          could not produce it.  Cf. Schaeffer v. Commissioner, T.C. Memo.            
          1994-206, where the taxpayers failed to furnish any records or              
          other information concerning unreported income in question,                 
          failed to show that the third-party information respondent used             
          was unreliable or inaccurate, and did not deny that they received           
          the income in question.  This Court held that the taxpayers                 
          failed to show that the notice of deficiency was arbitrary, which           

               2  Petitioner does not argue, and the record does not                  
          support, that any discount received was a purchase discount.                

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