-34-
C. Holding on the Fraud Additions
We find that the evidence clearly and convincingly proves
that petitioner's failure to file an income tax return for each
of the years 1989-92 was fraudulent within the meaning of section
6651(f). Respondent's determination that the 75-percent fraud
addition under section 6651(a) and (f) applies to each of the
years 1989-92 is sustained.
III. Should Respondent's Determinations of Petitioner's
Unreported Income for 1993 and 1994 Be Sustained?
Respondent did not use the "specific items" method to
reconstruct petitioner's income for 1993 and 1994. Instead,
respondent determined petitioner's income by reference to average
cost-of-living survey information obtained from the Bureau of
Labor Statistics (BLS). Using tables that classify the BLS
statistics according to age, size of consumer unit, occupation,
and location, respondent determined that petitioner had a cost of
living--and therefore must have had net business income--of
$34,533 and $35,638, in 1993 and 1994 respectively.
We sustain respondent's determinations of deficiencies in
petitioner's tax for 1993 and 1994, for the following reasons.
A. Reasonable Use of BLS Statistics
In certain circumstances, the Commissioner may use cost of
living statistics, including BLS survey information, to
reconstruct a taxpayer's income. See Giddio v. Commissioner, 54
T.C. 1530 (1970); Bennett v. Commissioner, T.C. Memo. 1998-96.
As we stated in Giddio v. Commissioner, supra at 1533:
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