- 9 -
Petitioner relies on United States v. Janis, supra, and
Portillo v. Commissioner, 932 F.2d 1128, 1133 (5th Cir. 1991),
revg. in part, affg. in part and remanding T.C. Memo. 1990-68, as
support for his position that the notice of deficiency in this
case is arbitrary and excessive and therefore not entitled to the
normal presumption of correctness. In Janis, the Supreme Court
held that a "'naked' assessment without any foundation
whatsoever" may be excessive and without rational foundation.4
United States v. Janis, supra at 441. In Portillo, the taxpayer
was issued a deficiency notice determining that he had received
unreported income due to a discrepancy between the amount he had
reported and the amount on a Form 1099 filed by his employer.
The employer could account for only part of the discrepancy and
had no records for the remainder. Because the taxpayer disputed
that he was paid the income, the Court of Apppeals for Fifth
Circuit found that the Commissioner had failed to substantiate
the deficiency by any other means, the Court of Appeals concluded
that the deficiency was excessive and arbitrary.
In a later case, the Court of Appeals for the Fifth Circuit
explained that its holding in Portillo does not require "an
4 Although the issue of a "naked assessment" generally
arises when an illegal tax-generating activity is alleged, the
Court of Appeals for the Eighth Circuit seems to have extended
the principle to legal tax-generating activity as well. See Day
v. Commissioner, 975 F.2d 534, 537 (8th Cir. 1992), affg. in
part, revg. in part and remanding on another issue T.C. Memo.
1991-140.
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