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questions that he was asked, and the questions that he did answer
he did not answer with any degree of specificity. With respect
to the real estate transactions, he was evasive and did not
recall specific transactions. Petitioner could not testify
whether his financial statements were accurate.
General Legal Principles
Respondent’s determinations of unreported income for the tax
years at issue are presumed correct, and petitioner bears the
burden of proving those determinations incorrect, arbitrary, or
erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933);
Parks v. Commissioner, 94 T.C. 654, 658-659 (1990). On the other
hand, respondent has the burden of proving by clear and
convincing evidence that some portion of an underpayment of taxes
by petitioner is due to fraud. Sec. 7454(a); Rule 142(b).
Section 6001 requires taxpayers to keep adequate records.
The regulations promulgated under that section provide:
Records. (a) In general. * * * any person subject
to tax under subtitle A of the Code * * * or any person
required to file a return of information with respect
to income, shall keep such permanent books of account
or records, including inventories, as are sufficient to
establish the amount of gross income, deductions,
credits, or other matters required to be shown by such
person in any return of such tax or information. [Sec.
1.6001-1(a), Income Tax Regs.]
In Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158,
1165 (1946), affd. 162 F.2d 513 (10th Cir. 1947), we stated:
The rule is well established that the failure of a
party to introduce evidence within his possession and
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