- 8 - 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 anPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011