Mark N. Wright and Erica Y. Wright - Page 16

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          I.   Burden of Proof                                                        
               As a general rule, the Commissioner’s determination of a               
          taxpayer’s liability for an income tax deficiency is presumed               
          correct, and the taxpayer bears the burden of proving that the              
          determination is improper.  See Rule 142(a); Welch v. Helvering,            
          290 U.S. 111, 115 (1933).  A limitation on this general rule                
          potentially applies in this case.  Courts of Appeals, including             
          that for the Eleventh Circuit, to which an appeal in this case              
          would normally lie, have indicated that before the Commissioner             
          may rely on the presumption of correctness in unreported income             
          cases the determination must be supported by at least a “minimal”           
          factual predicate or foundation of substantive evidence linking             
          the taxpayer to the income generating activity or to the receipt            
          of funds.  Blohm v. Commissioner, 994 F.2d 1542, 1549 (11th Cir.            
          1993), affg. T.C. Memo. 1991-636; see also Palmer v. United                 
          States, 116 F.3d 1309, 1313 (9th Cir. 1997); United States v.               
          Walton, 909 F.2d 915, 918-919 (6th Cir. 1990).                              
               Where the Commissioner introduces such evidence to support a           
          determination that the taxpayer received unreported income, as              
          respondent did here, the burden generally is on the taxpayer to             
          show by a preponderance of the evidence that the determination              
          was arbitrary or erroneous.  Hardy v. Commissioner, 181 F.3d                
          1002, 1004 (9th Cir. 1999), affg. T.C. Memo. 1997-97.  Deductions           

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