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TCO Martin determined, based on his review of the
documentation presented, that petitioner did not maintain
adequate records to account for gross receipts from her flea
market sales. TCO Martin therefore used a “cash T analysis”, an
indirect method to reconstruct income. He compared petitioner’s
known sources of income to her personal expenditures to determine
whether more was spent than was reported. The cash T analysis
reflected that petitioner expended $17,871 more than her known
sources of income for 2002. TCO Martin concluded that the excess
expenditures suggested that petitioner had unreported gross
receipts of at least $17,871 from her flea market sales.3
Discussion
Generally, the Commissioner’s determinations in a notice of
deficiency are presumed correct, and the taxpayer has the burden
of proving that those determinations are erroneous. See Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). In some
cases the burden of proof with respect to relevant factual issues
may shift to the Commissioner under section 7491(a). Petitioner
did not present evidence or argument that she satisfied the
requirements of section 7491(a). Therefore, the burden of proof
does not shift to respondent.
3Because of respondent’s mathematical error, the statutory
notice of deficiency incorrectly indicated that the adjustment to
petitioner’s Schedule C gross receipts was $17,368. The correct
adjustment would have been $17,871.
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Last modified: May 25, 2011