John Wadsworth - Page 14

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          Agent Christenot substituted for the estimated housing expenses             
          listed in the BLS the actual mortgage payments made by petitioner           
          for the years in issue as determined from the above-mentioned               
          IRMF regarding petitioner.  A copy of those statistics was                  
          forwarded to petitioner with the statutory notice of deficiency.            
               Section 7602(a)(1) authorizes the Secretary to examine any             
          books, papers, records, or other data which may be relevant for             
          the purpose of ascertaining the correctness of any return.                  
          Where, as here, the taxpayer refuses to cooperate in the                    
          determination of his income, the Internal Revenue Service has               
          great latitude in determining a taxpayer's tax liability.  Giddio           
          v. Commissioner, 54 T.C. 1530 (1970).  Respondent may use one or            
          more of several indirect methods to reconstruct a taxpayer's                
          income.  Sec. 446(b).  One of the permitted methods, such as was            
          used in this case, relies on the BLS data.  See Giddio v.                   
          Commissioner, supra; Thomas v. Commissioner, T.C. Memo. 1996-492;           
          Moll v. Commissioner, T.C. Memo. 1987-39; Denson v. Commissioner,           
          T.C. Memo. 1982-360.                                                        
               The Court of Appeals for the Ninth Circuit, to which an                
          appeal in this case would lie, considered issues similar to the             
          issues under discussion in this case in Edwards v. Commissioner,            
          680 F.2d 1268 (9th Cir. 1982).  In Edwards, the taxpayers were              
          the former owners of an auto repair business.  Prior to 1971,               
          they had filed Federal income tax returns.  For the years 1971              
          through 1976, William Edwards filed "protest returns".  On those            




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