Jerry L. Crabtree - Page 16

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             the pay telephone.  Petitioners bear the burden of proving               
             that respondent’s determination is incorrect as to each of               
             those adjustments.  See Rule 142(a).                                     
                  Petitioners argue that respondent’s use of the unit                 
             markup method of reconstructing income is improper because               
             Crabtree Investments maintained detailed and adequate                    
             records.  Petitioners reason that, because its records                   
             were consistent with the information reported on its tax                 
             returns, we must accept the records as clearly reflecting                
             its taxable income.  We disagree.                                        
                  Taxpayers are required to keep adequate books or                    
             records from which their correct tax liability can be                    
             determined.  See sec. 6001.  The Commissioner may test                   
             the adequacy of a taxpayer’s books and records by any                    
             reasonable method which, in the Commissioner’s judgment,                 
             properly reflects taxpayer’s taxable income.  See Holland                
             v. United States, 348 U.S. 121, 131-132 (1954); Lipsitz v.               
             Commissioner, 21 T.C. 917, 931 (1954), affd. 220 F.2d 871                
             (4th Cir. 1955).  If the Commissioner determines that a                  
             taxpayer’s books and records are not adequate, then the                  
             Commissioner is entitled to reconstruct the taxpayer’s                   
             income by any reasonable means.  See sec. 446(b); Webb v.                
             Commissioner, 394 F.2d 366, 371-372 (5th Cir. 1968), affg.               
             T.C. Memo. 1966-81.                                                      

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