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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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