David A. Demetree - Page 7

                                        - 7 -                                         
          tickets, revised his determinations relating to 1984, 1985, 1986,           
          1988, 1989, 1991 and 1992.  The increases in the deficiencies               
          totaled $145,010, the additions to tax totaled $41,028.40, and              
          the penalties totaled $1,820.60.  With respect to 19832 and 1987,           
          respondent determined decreases in the deficiencies totaling                
          $5,935 and additions to tax totaling $4,875.75.                             
               On September 25, 1996, petitioners, while residing in                  
          Longwood, Florida, filed petitions with this Court.  On April 29,           
          1997, the Court granted their motion to consolidate the two                 
          cases.                                                                      
                                       OPINION                                        
          I.   Burden of Proof                                                        
               Petitioners contend that the direct and indirect income                
          reconstruction methods that respondent used to determine the                
          deficiencies in his notices were arbitrary and excessive.  We               
          disagree.  David had a duty, but failed, to maintain adequate               
          financial records relating to most of the years in issue.  Sec.             
          6001; sec. 1.6001-1(a), Income Tax Regs.  Accordingly,                      
          respondent’s use of the direct and indirect income reconstruction           


               2  At trial respondent discovered that the revised                     
          deficiency for 1983 in his amendment to answer should have been             
          increased rather than decreased.  In his brief, respondent asks             
          the Court to rely on the original deficiency in the notice                  
          relating to 1983.  We grant respondent’s request on brief because           
          it does not prejudice petitioners (i.e., petitioners were put on            
          notice of the deficiency and additions to tax, and the request              
          does not raise any new issues).  See Rule 41(a); Foman v. Davis,            
          371 U.S. 178, 182 (1962).                                                   




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  Next

Last modified: May 25, 2011