Raymond F. Kling and Barbara K. Kling - Page 20




                                       - 20 -                                         
                                       OPINION                                        
          Issue 1.  Whether Petitioners Had Unreported Net Income From a              
          Sports Memorabilia Activity in the Amounts of $96,350 in 1991 and           
          $28,001 in 1992                                                             
               Gross income includes income derived from business.  See               
          sec. 61(a)(2).  Gross income is construed broadly to include all            
          "accessions to wealth, clearly realized, and over which the                 
          taxpayers have complete dominion."  Commissioner v. Glenshaw                
          Glass Co., 348 U.S. 426, 431 (1955); Hawkins v. United States, 30           
          F.3d 1077, 1079 (9th Cir. 1994).  Every person subject to income            
          tax is required to keep books and records that establish the                
          amount of gross income and deductions shown by that person on his           
          or her income tax return.  See sec. 6001;  sec. 1.6001-1(a),                
          Income Tax Regs.                                                            
               When a taxpayer fails to keep adequate records, the                    
          Commissioner is authorized to determine the existence and amount            
          of the taxpayer's income by any method that clearly reflects                
          income.  See sec. 446(b); Holland v. United States, 348 U.S. 121            
          (1954); Mallette Bros. Constr. Co. v. United States, 695 F.2d               
          145, 148 (5th Cir. 1983); Webb v. Commissioner, 394 F.2d 366,               
          371-372 (5th Cir. 1968), affg. T.C. Memo. 1966-81.  The                     
          reconstruction of income need only be reasonable in light of all            
          surrounding facts and circumstances.  See Palmer v. IRS, 116 F.3d           
          1309, 1312 (9th Cir. 1997); Giddio v. Commissioner, 54 T.C. 1530,           
          1533-1534 (1970); Schroeder v. Commissioner, 40 T.C. 30, 33                 







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