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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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