Michael O'Keefe Sowell - Page 10




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               In his motion, petitioner does not distinguish between                 
          reasonableness “as a matter of law” or “as a matter of fact”.               
          The Court assumes that petitioner intended to dispute the                   
          reasonableness of respondent’s position both in law and in fact.            
          Consequently, the Court treats the two separate items in                    
          conjunction with each other.  See Kingston v. Commissioner, T.C.            
          Memo. 1998-119.                                                             
               In determining the deficiency against petitioner, respondent           
          acted upon third party information from a credible source, the              
          establishment where the alleged gambling took place.  In                    
          addition, the Forms W-2G appeared to bear petitioner’s signature.           
          Respondent’s initial determination that petitioner had failed to            
          report gambling winnings was based on this information.  This               
          reliance on apparently credible third party information was                 
          reasonable, since at that time it had not been refuted by                   
          petitioner.  See, e.g., Uddo v. Commissioner, T.C. Memo. 1998-276           
          (IRS justified in relying on Form 1099-R issued by a third                  
          party); Andrews v. Commissioner, T.C. Memo. 1998-316 (IRS could             
          rely on Forms W-2 and 1099 to support deficiency where its action           
          was not arbitrary and where taxpayer failed to file tax returns);           
          Schaeffer v. Commissioner, T.C. Memo. 1994-206 (IRS’ disallowance           
          of deductions was not arbitrary where taxpayers failed to provide           
          information substantiating the items).                                      







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