Stuart M. Smith, Jr. - Page 4




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         supporting its determination.”  Portillo v. Commissioner, 932                
         F.2d 1128, 1133 (5th Cir.), affg. in part and revg. and remanding            
         in part T.C. Memo. 1990-68.  If the presumption of correctness               
         does not apply, respondent’s determination will be deemed                    
         arbitrary, and he will bear the burden of proving it correct.                
         See Sealy Power, Ltd. v. Commissioner, 46 F.3d 382, 386 (5th Cir.            
         1995), affg. in part and revg. and remanding in part T.C. Memo.              
         1992-168.  Thus, respondent must establish that he had predicate             
         evidence for his determinations that petitioner received self-               
         employment income relating to 1993 through 1996.1                            
              Respondent has established that he had predicate evidence               
         (i.e., the questionnaire) for his determinations that petitioner             
         received self-employment income in 1995 and 1996.  The                       
         presumption of correctness is applicable, and petitioner failed              
         to present sufficient evidence establishing that these                       
         determinations are erroneous.  Accordingly, we sustain                       
         respondent’s determinations relating to petitioner’s income and              
         self-employment tax deficiencies relating to 1995 and 1996.                  
              Respondent failed, however, to establish that he had                    
         predicate evidence for his determinations that petitioner                    


               1  Respondent, citing Parker v. Commissioner, 117 F.3d 785             
          (5th Cir. 1997), contends that he does not have to establish                
          predicate evidence for these determinations.  We disagree.  The             
          holding in Parker applies only to Commissioner’s determinations             
          relating to income reported by third-party payors.  See id. at              
          787 (holding that respondent has no duty to investigate third-              
          party payment reports that are not disputed by the taxpayer).               





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