- 13 -
testimony based thereon is also unreliable and entitled to little or
no weight.12
In the final analysis, it is apparent, on the basis of all the
evidence in the record, that respondent’s deficiency figures for
petitioner’s alleged illegal income are predicated on the unreliable
and inadmissible evidence of the photocopied pages. In Rosano v.
Commissioner, 46 T.C. 681, 687 (1966), we observed that “the
Commissioner’s determination may often rest upon hearsay or other
inadmissible evidence, and we know of no rule of law calling for a
review of the materials that were before the Commissioner in order
to ascertain whether he relied upon improper evidence”. By the same
token, however, if the Commissioner undertakes to demonstrate the
basis of his determination with unreliable evidence and in the
process convinces the Court that his determination is arbitrary,
12 In light of our conclusion that the testimony in question
was proffered as expert testimony, based on “specialized
knowledge” of respondent’s witness as a former police officer, it
follows that the testimony is not admissible as opinion testimony
by a lay witness under Fed. R. Evid. 701 (providing that opinion
testimony by lay witnesses is limited to opinions that are not
based on, among other things, “scientific, technical, or other
specialized knowledge within the scope of Rule 702.”). Even if
we had concluded, however, that the opinion testimony in question
was not based on specialized knowledge within the scope of Fed.
R. Evid. 702, we would nevertheless disregard the testimony as
improper opinion testimony by a lay witness, in that respondent’s
witness failed to establish a reliable factual predicate for his
opinion testimony. See Chagra v. Commissioner, T.C. Memo. 1991-
366, affd. without published opinion 990 F.2d 1250 (2d Cir.
1993); see also United States v. Williams, 212 F.3d 1305, 1310
(D.C. Cir. 2000) (“to admit lay opinion evidence rationally based
on the witness’s perception, a sufficient factual foundation must
exist”).
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