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for Perrier Group of America during 1995 and 1996. At the time
he made his determinations, respondent had no record (i.e., no
Forms W-2 or 1099) of petitioner’s working for either of these
businesses.
Petitioner failed to provide respondent with any information
relating to his income. Respondent, using 1992 as the base year,
reconstructed petitioner’s gross income relating to 1993 through
1996 by applying the Consumer Price Index (CPI) method to 1993
through 1996 and subtracting income reported on Forms W-2 and
1099. On December 9, 1998, respondent mailed petitioner notices
of deficiency in which respondent determined that petitioner:
(1) Received self-employment income of $5,524, $19,986, $17,165,
and $23,329 relating to 1993, 1994, 1995, and 1996, respectively;
and (2) was liable for income tax and, pursuant to section 1401,
self-employment tax.
OPINION
I. Reconstructed Self-Employment Income
Generally, a notice of deficiency is presumed correct, and
the taxpayer bears the burden of proving that the determination
is erroneous. See Welch v. Helvering, 290 U.S. 111, 115 (1933).
The Court of Appeals for the Fifth Circuit, where an appeal would
lie, has recognized, however, that “a court need not give effect
to the presumption of correctness in a case involving unreported
income if the Commissioner cannot present some predicate evidence
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