- 14 -
petitioner argues that she effectively rebutted the presumption
of correctness by presenting competent and relevant evidence
showing that the determination is erroneous. We do not
completely agree.
At trial, petitioner proffered into evidence a copy of a
Form 1099-MISC (Form 1099), listing Cappy's as the payor and
petitioner as the recipient of $44,275 of nonemployee
10(...continued)
the Third Circuit, the circuit to which this case is appealable,
recognizes an exception to the general rule that respondent's
determination is entitled to a presumption of correctness.
Anastasato v. Commissioner, 794 F.2d 884, 887 (3d Cir. 1986),
vacating T.C. Memo. 1985-101. In cases of unreported income,
whether derived from legal or illegal sources, the Commissioner
must provide some predicate evidence connecting the taxpayer to
an income-producing activity in order to prevent the
determination from being a "naked assessment" without any factual
foundation. Id. Respondent's proper reconstruction of a
taxpayer's income can also provide the factual foundation
necessary to entitle respondent's determination to a presumption
of correctness. See Portillo v. Commissioner, 932 F.2d 1128,
1133-1134 (5th Cir. 1991) ("before we will give the Commissioner
the benefit of the presumption of correctness, he must engage in
one final foray for truth * * * such as by showing the taxpayer's
net worth, bank deposits, cash expenditures”), affg. in part and
revg. in part T.C. Memo. 1990-68, citing Weimerskirch v.
Commissioner, 596 F.2d 358, 362 (9th Cir. 1979), revg. 67 T.C.
672 (1977); see also Hoffman v. Commissioner, 298 F.2d 784, 786
(3d Cir. 1962) (respondent's reconstruction of income was
evidence of petitioner's unreported income entitling respondent's
determination to a presumption of correctness), affg. in part
T.C. Memo. 1960-160; Tokarski v. Commissioner, 87 T.C. 74, 76
(1986) (where respondent determined that petitioner had
unreported income using the bank deposits method, respondent was
not required to produce evidence linking petitioner's income to
an income producing activity); Alvarez v. Commissioner, T.C.
Memo. 1995-414 (distinguishing cases that required linking
unreported income to an income-producing activity where
respondent reconstructed petitioner's income).
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