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Commissioner must establish "some evidentiary foundation" linking
the taxpayer to the income-producing activity, Weimerskirch v.
Commissioner, 596 F.2d 358, 361-362 (9th Cir. 1979), revg. 67
T.C. 672 (1977), or “demonstrating that the taxpayer received
unreported income”, Edwards v. Commissioner, 680 F.2d 1268, 1270
(9th Cir. 1982); see also Rapp v. Commissioner, 774 F.2d 932, 935
(9th Cir. 1985). Once there is evidence of actual receipt of
funds by the taxpayer, the taxpayer has the burden of proving
that all or part of those funds are not taxable. Tokarski v.
Commissioner, 87 T.C. 74 (1986).
There is ample evidence linking petitioners to an income-
producing activity, and respondent has demonstrated that
petitioners received unreported income.
A. Unit and Volume Method
The first method respondent employed on brief to reconstruct
petitioners’ gross receipts from the multilevel marketing
business was the unit and volume method. This method of proof is
an established method accepted by the Court. See King v.
Commissioner, T.C. Memo. 1998-69, affd. without published opinion
182 F.3d 903 (3d Cir. 1999); Park v. Commissioner, T.C. Memo.
8(...continued)
Cir. 1979), revg. 67 T.C. 672 (1977), was an unreported income
case regarding illegal source income, the U.S. Court of Appeals
for the Ninth Circuit applies the Weimerskirch rule in all cases
involving the receipt of unreported income. See Edwards v.
Commissioner, 680 F.2d 1268, 1270-1271 (9th Cir. 1982); Petzoldt
v. Commissioner, 92 T.C. 661, 689 (1989).
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