Charles Shaw - Page 12

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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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