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C. Amounts of Deficiencies; Nonfraudulent Causes
In parts II. A. and II. B. of this opinion, respondent had
the burden of proving, by clear and convincing evidence, that
there were underpayments of tax, some part of which was due to
fraud; respondent carried this burden.
In this part of the opinion, petitioners have the burden of
proving, by a preponderance of the evidence, that the
deficiencies12 are less than the amounts respondent determined in
the notice of deficiency. See Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933).
Petitioners also have the burden of proving, by a
preponderance of the evidence, that some part of the 1991 or 1992
underpayment is not due to fraud. See sec. 6663(b).
In the absence of adequate records, respondent may employ
reasonable methods of reconstructing petitioners’ taxable income
in a manner which clearly reflects income. See sec. 446(b);
Holland v. United States, 348 U.S. 121 (1954); Parks v.
Commissioner, 94 T.C. at 658.
Although the notice of deficiency does not so state, it is
evident from the record herein that respondent’s notice of
deficiency determinations of “Other Unreported Income” are based
12For purposes of the instant case, “deficiency” is the same
as “underpayment”. Compare sec. 6211(a) with sec. 6664(a).
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