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if the Commissioner provides a minimal evidentiary foundation
showing that there is a link between the taxpayers and either the
taxable income or the income-producing activity. Petzoldt v.
Commissioner, supra; Kaufman v. Commissioner, T.C. Memo. 2003-
262; Fankhanel v. Commissioner, supra; Prindle Intl. Mktg. v.
Commissioner, T.C. Memo. 1998-164, affd. without published
opinion sub nom. Fox v. Commissioner, 229 F.3d 1157 (9th Cir.
2000).
The only evidence either party submitted regarding the
unreported capital gain issue was a copy of petitioners’ 1999
Form 1040, the examination report, and the notice of deficiency.
In these documents, the only explanation of respondent’s
determination that petitioners received unreported income in 1999
is the following statement made to petitioners in the notice of
deficiency: “It is determined that you realized a capital gain
in the amount of $15,000.00 for tax year 1999. Accordingly,
taxable income is increased $15,000.00 for the tax year ending
December 31, 1999.”
The examination report contains an explanation section for
capital gains and losses, but the entire discussion in that
section relates to Mr. Dunne’s issues with FRC, and there is no
reference to a $15,000 capital gain in 1999 in either the facts
or conclusion of that section. The examination report did state
in its conclusion that it will be necessary to compute the
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