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The Court of Appeals for the Second Circuit, the circuit to
which venue for appeal of the instant case, if any, would lie,
has recognized an exception to the presumption of correctness by
requiring the Commissioner in unreported income cases to provide
evidence linking the taxpayer with some tax-generating acts. See
Llorente v. Commissioner, 649 F.2d 152, 156 (2d Cir. 1981), affg.
in part, revg. in part and remanding 74 T.C. 260 (1980). The
exception to the presumption of correctness, however, applies
only where the Commissioner has failed to provide any evidentiary
foundation. Hardy v. Commissioner, 181 F.3d 1002, 1005 (9th Cir.
1999), affg. T.C. Memo. 1997-97.
The Commissioner may satisfy the predicate evidence
requirement in unreported income cases by introducing evidence
linking the taxpayer to tax-generating acts. See Llorente v.
Commissioner, supra at 156; Shriver v. Commissioner, 85 T.C. 1, 4
(1985). Courts have allowed the Commissioner to offer a variety
of forms of evidence linking the taxpayer to tax-generating acts.
See Hardy v. Commissioner, supra at 1005 (income statements from
taxpayer's spouse's employer and bank); Delaney v. Commissioner,
743 F.2d 670 (9th Cir. 1984) (taxpayer's admission of ownership
of more than $40,000 of Swiss gold coins), affg. T.C. Memo. 1982-
666; Johnston v. Commissioner, T.C. Memo. 2000-315 (income
received by a trust of which the taxpayer was an original capital
holder for services performed by the taxpayer); Smith v.
Commissioner, T.C. Memo. 2000-43 (taxpayer's employment
questionnaire identifying jobs for which IRS had no record).
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