- 2 -
1993 37,731 9,433 1,584
1994 2,456 473 93
1995 9,596 1,895 401
All section references are to the Internal Revenue Code in effect
for the years in issue. When Mr. Smus filed his petition, on
September 29, 1997, he resided in Rockford, Michigan. Mr. Smus
did not file Federal income tax returns relating to the years in
issue.
Respondent contends that Mr. Smus received and failed to
report self-employment income relating to 1991, 1992, and 1993.
In the notice of deficiency issued to Mr. Smus, respondent
informed Mr. Smus that "In the absence of adequate records, your
gross receipts for the taxable years ended December 31, 1991,
1992 and 1993 have been computed by reference to bank deposits."
The notice delineates that respondent further determined that Mr.
Smus failed to report, in 1993, 1994, and 1995, installment sale
gain and interest income, and, in 1994 and 1995, wages from
AutoDie International. Mr. Smus contends that respondent's
determinations are arbitrary.
Where the issue in dispute is the taxpayer's receipt of
income, the Court of Appeals for the Sixth Circuit, where an
appeal would lie, has recognized:
It is a sound principle that "[a] deficiency
determination which is not supported by the proper
foundation of substantive evidence is clearly arbitrary
and erroneous," and that the Commissioner "cannot rely
on the presumption [of correctness] in the absence of a
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