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of the deficiency. Parks v. Commissioner, 94 T.C. 654, 660-661
(1990). “It is only if and when the Commissioner establishes an
underpayment by clear and convincing evidence that his deficiency
determination will enjoy its usual presumption of correctness.”
DiLeo v. Commissioner, supra at 873.
When a taxpayer fails to report gross receipts, an
underpayment of tax exists if the costs of goods sold and
deductible expenses are less than the unreported gross receipts.
Franklin v. Commissioner, T.C. Memo. 1993-184. The burden is on
the taxpayer to prove any deductions in addition to those claimed
on the return.
[Even] in criminal tax evasion cases, where the
Government bears the greater burden of proof beyond a
reasonable doubt, it is well settled--“that evidence of
unexplained receipts shifts to the taxpayer the burden
of coming forward with evidence as to the amount of
offsetting expenses, if any.” * * * [Franklin v.
Commissioner, supra (quoting Siravo v. United States,
377 F.2d 469 (1st Cir. 1967)).]
As stated above, we find that respondent has clearly proven
that Sam Kong Fashions received unreported income from Style
Setter and Half Moon Bay, and that Mr. Kong received unreported
constructive dividends. Other than the wage payments to Bi Ling
Wu and Wan Zi Chen, we also find that neither Sam Kong Fashions
nor Mr. Kong is entitled to any additional deductions.
Accordingly, we find that both Sam Kong Fashions and Mr. Kong
substantially understated their tax liabilities for 1994 and
1995.
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