Paul E. Ballmer - Page 4

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          amount he received from the FTB was income.  Petitioner did not,            
          however, seek advice from any tax professionals with respect to             
          these conclusions.                                                          
               Respondent issued a notice of deficiency to petitioner on              
          March 16, 2005.  Respondent adjusted petitioner’s income to                 
          include the $337,122.53 received from the FTB and determined a              
          deficiency of $109,215.  Respondent also asserted an addition to            
          tax under section 6651(a)(1) of $27,303.75, as well as an                   
          addition to tax under section 6654(a) of $4,364.63.                         
          I. Unreported Income                                                        
               The Commissioner’s determinations of deficiencies in tax               
          generally are presumed correct, and the taxpayer bears the burden           
          of proving that those determinations are erroneous.  Rule 142(a);           
          Welch v. Helvering, 290 U.S. 111, 115 (1933); Durando v. United             
          States, 70 F.3d 548, 550 (9th Cir. 1995).  The U.S. Court of                
          Appeals for the Ninth Circuit, to which an appeal of this case              
          would lie, has held that in order for the presumption of                    
          correctness to attach to the notice of deficiency in unreported             
          income cases, the Commissioner must establish some evidentiary              
          foundation “demonstrating that the taxpayer received unreported             
          income.”  Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th Cir.            
          1982).  Once there is some evidence, as there is here, that the             
          taxpayer received unreported income, the burden shifts to the               

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