David E. Christensen - Page 6

                                        - 6 -                                         
               2.   Determination in Unreported Income Cases                          
               The Court of Appeals for the Ninth Circuit has determined              
          that in order for the presumption of correctness to attach to a             
          deficiency determination in unreported income cases, the                    
          Commissioner must establish “some evidentiary foundation”                   
          connecting the taxpayer to the income-producing activity,                   
          Weimerskirch v. Commissioner, 596 F.2d 358, 361-362 (9th Cir.               
          1979), revg. 67 T.C. 672 (1977), or demonstrate the taxpayer                
          received unreported income, Edwards v. Commissioner, 680 F.2d               
          1268, 1270 (9th Cir. 1982).  Once there is evidence of actual               
          receipt of income by the taxpayer, the taxpayer has the burden of           
          proving that all or part of the income is not taxable.  Tokarski            
          v. Commissioner, 87 T.C. 74, 76-77 (1986).                                  
               A deficiency determination which is not supported by some              
          evidentiary foundation is arbitrary and erroneous.  Weimerskirch            
          v. Commissioner, supra at 362.  In these circumstances, the                 
          Commissioner has the burden of coming forward with evidence                 
          establishing the existence and amount of a deficiency.  Jackson             
          v. Commissioner, 73 T.C. 394, 401 (1979).                                   
               In this case, there is sufficient evidence linking                     
          petitioner to all the 1997 income-producing activities except the           
          amounts reported by NPC.  With respect to the Administrative                
          Record, petitioner testified:  (1) He was employed by Auspex                
          Systems, Inc., and  Microcadam, Inc, in 1997; (2) he had a                  

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  Next

Last modified: May 25, 2011