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created; i.e., deficiency notices, summonses, certain tax forms
prepared by the Commissioner, and documents showing the tax
calculations on which the deficiencies were based. Id. at 935.
Despite the fact that, as in the instant case, no underlying
third-party records were introduced linking the taxpayers with
any income-producing activity, the Commissioner was entitled to
rely on the presumption of correctness because the taxpayers did
not directly attack that presumption. Id. The Court of Appeals
took into account the fact that, in their petition, the Rapps had
alleged “as one ground of error that the Commissioner failed to
consider or allow for ‘legitimate and proper deductions.’” Id.
The Court of Appeals took the claim for deductions as evidence
that there was a source of related income: “The connection
between the Rapps and income-producing activity is sufficiently
acknowledged to permit the presumption of correctness to attach
to the Commissioner’s determination.” Id.
In Palmer v. United States, 116 F.3d 1309 (9th Cir. 1997),
the taxpayers (husband and wife) had failed to report income for
4 successive years. The Commissioner investigated and found
information that the taxpayer-husband, a self-employed
electrician, had worked for wages in years 1 and 4; respondent
found no information relating to specific employment during years
2 and 3. Id. at 1313. Nevertheless, the Commissioner determined
deficiencies in tax for years 2 and 3, using his reconstruction
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