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Jacobs v. Commissioner, T.C. Memo. 1974-73 (quoting Polizzi v.
Commissioner, 265 F.2d 498, 502 (6th Cir. 1959), affg. in part and
revg. in part T.C. Memo. 1957-159). In the instant case, as in
Thomas v. Commissioner, 223 F.2d at 90, respondent’s reconstruction
of petitioner’s alleged illegal income may have the “inviting
quality of apparent exactitude” but ultimately proves conjectural.
Cf. Jackson v. Commissioner, supra at 403 (“the elaborate construct
set out in the deficiency notice, based solely as it was on a
secondhand report of peripheral statements made by an unreliable
informant, turns out to be sheer gossamer”). We conclude that
respondent’s deficiency figures were so arbitrarily derived as to
negate any presumption of correctness. The record provides no
reliable basis for estimating petitioner’s alleged illegal income.
Accordingly, respondent’s determination with respect to this issue
is not sustained.
3. Additions to Tax
a. Addition to Tax for Failure To Timely File a Return
Respondent determined that petitioner is liable for the section
6651(a)(1) addition to tax for failure to timely file his 1988
Federal income tax return. Section 6651(a)(1) imposes an addition
to tax for failure to timely file a return unless the taxpayer
establishes that the failure “is due to reasonable cause and not due
to willful neglect”. A delay is due to reasonable cause if “the
taxpayer exercised ordinary business care and prudence and was
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