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Commissioner to show the taxpayer’s receipt of income in order to
satisfy the requirement of the Court of Appeals (and other
courts) that in unreported income cases the Commissioner’s
determination have some minimal factual predicate. In this
connection, the Court of Appeals has held that “The ‘presumption
of correctness’ is appropriate where evidence existed which
linked the taxpayers * * * with ‘the tax-generating activity.’”
Gold Emporium, Inc. v. Commissioner, 910 F.2d 1374, 1378 (7th
Cir. 1990), affg. Malicki v. Commissioner, T.C. Memo. 1988-559.
See Shriver v. Commissioner, 85 T.C. 1, 4 (1985), affd. per Order
(7th Cir. 1986).
The record in this case links petitioners throughout 1995,
the year at issue, to the two businesses, Barbara’s Gift Shop and
Barmes Wholesale. That record establishes that throughout that
year petitioners operated, controlled the operations of, and
controlled those two tax-generating activities. The instant
record also shows that the creation of Sandbar Wholesale Trust in
October 1995 did not change petitioners’ operation of, control
over the operations of, or control over Barbara’s Gift Shop and
Barmes Wholesale.
Petitioners also contend that the method that respondent
used in the notice to reconstruct petitioners’ Schedule C gross
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