- 8 - deductible expenses." Petitioner has stipulated to most of the specific items of income from identified sources as determined by respondent.3 Petitioner also admits that he received unreported income in some of the years, but in lesser amounts than determined by respondent, and denies receipt of unreported income in others. Petitioner contends that respondent's determinations of unreported income are arbitrary and erroneous. In general, respondent's determinations in the notices of deficiency are entitled to a presumption of correctness, and petitioner has the burden of proving them incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). However, the determinations may lose their presumption of correctness if they are arbitrary and erroneous. Pittman v. Commissioner, supra at 1317. In order to maintain the presumption of correctness, respondent's determinations need only have some minimal factual predicate. Id. The determinations need only be rational, not flawless, and to vitiate the presumption of correctness, a taxpayer must show that the determinations were arbitrary and erroneous, not merely erroneous. Id. To establish the required factual predicate, it is ordinarily sufficient for the Commissioner to show that the taxpayer was engaged in an income- producing activity for each year in which it has been determined 3 With respect to respondent's determination of income from real estate sales in 1989 and 1991, petitioner has stipulated only to the amount of the gross sales proceeds in each transaction.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011