- 42 -
Helvering v. Taylor, 293 U.S. 507, 515 (1935); Cebollero v.
Commissioner, 967 F.2d 986, 990 (4th Cir. 1992), affg. T.C. Memo.
1990-618.
On rare occasions, this Court has recognized an exception to
these rules in cases involving unreported income where the
Commissioner introduces no substantive evidence but relies solely
on the presumption of correctness. Jackson v. Commissioner, 73
T.C. 394, 401 (1979). In such cases, if the taxpayers challenge
the notice of deficiency on the ground that it is arbitrary, then
the determination is treated as a “naked” assessment and the
presumption of correctness does not attach. Id. However, this
is a limited exception, and it does not apply when the
Commissioner has provided a minimal evidentiary foundation.
Petzoldt v. Commissioner, 92 T.C. 661, 687-688 (1989); Fankhanel
v. Commissioner, T.C. Memo. 1998-403, affd. without published
opinion 205 F.3d 1333 (4th Cir. 2000).
This exception to the presumption of correctness (the
exception) has been widely accepted among the Courts of Appeals.
See Blohm v. Commissioner, 994 F.2d 1542, 1549 (11th Cir. 1993),
affg. T.C. Memo. 1991-636; Dodge v. Commissioner, 981 F.2d 350,
353 (8th Cir. 1992), affg. in part and revg. in part 96 T.C. 172
(1991); Portillo v. Commissioner, 932 F.2d 1128, 1133-1134 (5th
Cir. 1991), affg. in part and revg. in part T.C. Memo. 1990-68;
United States v. Walton, 909 F.2d 915, 919 (6th Cir. 1990); Ruth
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