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Williams obtained from Panalpina listed other vendors.
Petitioner contends that Williams’ failure to obtain information
from other vendors about how much petitioner paid them in the
years in issue means that the determination of costs of goods
sold was arbitrary. We disagree.
Williams’ analysis is a reasonable basis for the notice of
deficiency. Thus, the notice of deficiency is presumed to be
correct, and petitioner bears the burden of proving that the
deficiencies were less than determined by respondent.4 Welch v.
Commissioner, 204 F.3d 1228, 1230 (9th Cir. 2000), affg. T.C.
Memo. 1998-121; Calhoun v. United States, 591 F.2d 1243, 1245
(9th Cir. 1978); Clayton v. Commissioner, 102 T.C. 632, 645
(1994); DiLeo v. Commissioner, 96 T.C. 858, 869 (1991), affd. on
other grounds 959 F.2d 16 (2d Cir. 1992); Parks v. Commissioner,
94 T.C. 654, 660 (1990). That burden of proof is important
because petitioner lacked important business records.
Conversely, there are gaps in Williams’ analysis which are
important to issues where respondent has the burden of proof;
i.e., whether petitioner is liable for fraud, and whether the
deficiencies are larger than respondent determined.
4 Sec. 7491(a) does not apply because the examination for
each year in issue commenced before July 23, 1998.
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