Ronald E. Reed - Page 5

                                        - 5 -                                         

               1986 Pantera             --        22,445    --                        
               4120 Eierman Ave.        --        --    1$10,558                      
               Rt. 40 West Furniture    --        --        2,196                     
               1984 Lotus               --        --        13,185                    
               1984 Porsche Cabriolet      --        --       5,000                   
               Totals                   17,774   179,209    30,939                    
               1  The amount shown as expended for this property has been1                                                                     
          adjusted to reflect the agreement of the parties.                           
               With respect to certain of those items, the statement of               
          facts recites that petitioner used his mother, Dolores Bruno, as            
          a nominee to disguise his purchases.                                        
               The District Court accepted petitioner’s guilty pleas and              
          entered verdicts of guilty.  Subsequently, the District Court               
          entered a judgment in accordance with its verdicts and sentenced            
          petitioner to imprisonment for 97 months.                                   
               Petitioner made returns of income for each of the years in             
          issue, but reported no income from his illegal drug activities.             
               Respondent’s determination of deficiencies in tax for the              
          years in question is, principally, the result of respondent’s               
          adjusting petitioner’s gross income for each year to include                
          amounts equal to petitioner’s expenditures for the listed                   
          property.                                                                   
                                     Discussion                                       
          I.  Preliminary Matter                                                      
               The general rule is that the burden of proof is upon                   
          petitioner, Rule 142(a), which he must carry by a preponderance             
          of the evidence, e.g., Schaffer v. Commissioner, 779 F.2d 849,              





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Last modified: May 25, 2011