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liability, the Commissioner is authorized to reconstruct income
by any reasonable method which will clearly reflect income. Sec.
446(b); Commissioner v. Hansen, 360 U.S. 446, 467 (1959); Palmer
v. IRS, 116 F.3d 1309, 1312 (9th Cir. 1997); Petzoldt v.
Commissioner, 92 T.C. 661, 686-687 (1989).
As a general rule, in court proceedings arising in
connection with examinations commenced before July 23, 1998, the
Commissioner's deficiency determination is presumed correct, and
the taxpayer bears the burden of proof in such cases. Sec.
7491(a)(2); Omnibus Consolidated and Emergency Supplemental
Appropriations Act of 1999, Pub. L. 105-277, sec. 4002(b), 112
Stat. 2681-906; Rule 142(a). As previously stated, the
examination in this case began on December 17, 1997.
The Court of Appeals for the Ninth Circuit, to which appeal
in the instant case would normally lie, has indicated that before
the presumption of correctness will attach in an unreported
income case, the determination must be supported by at least a
minimal factual predicate or foundation of substantive evidence
linking the taxpayer to income-generating activity or to the
receipt of funds. Palmer v. IRS, supra at 1312; Rapp v.
Commissioner, 774 F.2d 932, 935 (9th Cir. 1985); see also
Petzoldt v. Commissioner, supra at 687-689.
Here, the record clearly links petitioner to an
income-generating activity. During 1993, petitioner was an
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