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obtained from illegal sources. James v. United States, 366 U.S.
213 (1961); Browning v. Commissioner, T.C. Memo. 1991-93; sec.
1.61-14(a), Income Tax Regs.
Section 6001 requires taxpayers to maintain records
sufficient to determine their correct Federal income taxes.
Petzoldt v. Commissioner, 92 T.C. 661, 686 (1989). If taxpayers
fail to maintain or do not produce adequate books and records,
respondent is authorized by section 446 to reconstruct the
taxpayers’ income. Sec. 446(b); Petzoldt v. Commissioner, supra
at 686-687; Giddio v. Commissioner, 54 T.C. 1530, 1533 (1970);
Schroeder v. Commissioner, 40 T.C. 30, 33 (1963); Bratulich v.
Commissioner, T.C. Memo. 1990-600.
For the years in issue petitioners failed to maintain and to
produce records of petitioner’s illegal marijuana sales.
Respondent reconstructed petitioners’ income for each year by
using the specific item method of proof, a method approved by
this Court on numerous occasions. See, e.g., Estate of Beck v.
Commissioner, 56 T.C. 297, 353-354 (1971); Pappas v.
Commissioner, T.C. Memo. 2002-127; Levine v. Commissioner, T.C.
Memo. 1998-383, affd. 229 F.3d 1158 (9th Cir. 2000); Baker v.
Commissioner, T.C. Memo. 1991-340, affd. 9 F.3d 1550 (9th Cir.
1993).
Based on information respondent’s agent obtained from
interviews with Posey and Cunningham and from undercover tapes,
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