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OPINION
I. Deficiency
A. Burden of Proof
The Commissioner’s determinations 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,4 the
Commissioner must establish “some evidentiary foundation” linking
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 “demonstrating that the taxpayer received
unreported income”, Edwards v. Commissioner, 680 F.2d 1268, 1270
(9th Cir. 1982); see also Rapp v. Commissioner, 774 F.2d 932, 935
(9th Cir. 1985). Once there is evidence of actual receipt of
funds by the taxpayer, the taxpayer has the burden of proving
that all or part of those funds are not taxable. Tokarski v.
4 Although Weimerskirch v. Commissioner, 596 F.2d 358 (9th
Cir. 1979), revg. 67 T.C. 672 (1977), was an unreported income
case regarding illegal source income, the U.S. Court of Appeals
for the Ninth Circuit applies the Weimerskirch rule in all cases
involving the receipt of unreported income. See Edwards v.
Commissioner, 680 F.2d 1268, 1270-1271 (9th Cir. 1982); Petzoldt
v. Commissioner, 92 T.C. 661, 689 (1989).
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Last modified: November 10, 2007