Everett J. Diers - Page 5

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          petitioner failed to report Schedule C nonemployee compensation             
          of $26,738,3 that petitioner is not entitled to claim Schedule C            
          automobile expenses or office expenses of $8,910 and $3,600,                
          respectively, and that petitioner is subject to self-employment             
          tax of $6,365.                                                              
          A.   Unreported Income                                                      
               Section 61(a) provides that “gross income means all income             
          from whatever source derived” except as otherwise provided.  The            
          definition of gross income is broad, Commissioner v. Glenshaw               
          Glass Co., 348 U.S. 426, 429-430 (1955), and exclusions from                
          gross income are narrowly construed, United States v. Burke, 504            
          U.S. 229, 248 (1992); United States v. Centennial Sav. Bank FSB,            
          499 U.S. 573, 583 (1991).                                                   
               Respondent’s determinations in the notice of deficiency are            
          presumed correct, and petitioner must prove those determinations            
          wrong in order to prevail.4  Rule 142(a); Welch v. Helvering, 290           
          U.S. 111, 115 (1933).  As relevant to the present case,                     
          petitioner asserts that the settlement agreement provided for               

               3 This amount comprises Form 1099 income of $25,766 from               
          American, $175 from Capitol, and $797 from Life USA.                        
               4 Petitioner does not contend that sec. 7491(a) is                     
          applicable to this case.  Sec. 7491(a) is in any event                      
          inapplicable because of petitioner’s failure to comply with the             
          substantiation and recordkeeping requirements of sec. 7491(a)(2)            
          or to introduce credible evidence within the meaning of sec.                

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