Terry I. and Louise Major - Page 16

                                       - 16 -                                         
          petitioners had sufficient notice to reasonably contest the                 
          documents, and, thus, the Court admitted the documents into                 
          III. Petitioners’ Income Tax Liability                                      
               A.   Burden of Proof                                                   
               In general, the Commissioner’s determination of a taxpayer’s           
          tax liability is presumed correct, and the taxpayer bears the               
          burden of proving that respondent’s determination is improper.              
          Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).  The             
          “presumption of correctness” is appropriate where respondent has            
          furnished evidence linking the taxpayer to the “tax generating              
          activity”.  Gold Emporium, Inc. v. Commissioner, 910 F.2d 1374,             
          1378 (7th Cir. 1990), affg. Malicki v. Commissioner, T.C. Memo.             
          1988-559.  If respondent introduces evidence that the taxpayer              
          received unreported income, then the burden shifts to the                   
          taxpayer to show by a preponderance of the evidence that the                
          deficiency was arbitrary and erroneous.  Hardy v. Commissioner,             
          181 F.3d 1002, 1004 (9th Cir. 1999), affg. T.C. Memo. 1997-97;              
          see also Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th Cir.             
          1982) (“[T]he Commissioner’s assertion of deficiencies are                  
          presumptively correct once some substantive evidence is                     
          introduced demonstrating that the taxpayer received unreported              
          income.”).  In this case, respondent need only present some                 
          substantive evidence that petitioners received income in 2001 to            
          shift the burden to petitioners.  Hardy v. Commissioner, supra at           

Page:  Previous  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  Next

Last modified: May 25, 2011