New York Guangdong Finance, Inc. - Page 11




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          deficiency was capricious and arbitrary.9  In support of its                
          position, petitioner cites Portillo v. Commissioner, 932 F.2d               
          1128 (5th Cir. 1991), affg. in part, revg. in part and remanding            
          T.C. Memo. 1990-68.10                                                       
               In Portillo, the Commissioner determined that the taxpayer             
          had unreported income by comparing the amount of income reported            
          on a Form 1099 that had been issued to the taxpayer by a third              
          party with the amount of income from the third party payor                  
          reported on the taxpayer’s Form 1040, U.S. Individual Income Tax            
          Return.  Id. at 1131.  When the amounts did not match, the                  
          Commissioner concluded that the Form 1099 was accurate, even                
          though the third party who submitted the Form 1099 could not                
          substantiate the amount of income he allegedly paid.  Id.  The              
          Commissioner determined that the taxpayer had received unreported           
          income equal to the discrepancy between the Form 1099 amount and            
          the amount reported on the taxpayer’s return, and we upheld the             
          determination.  Id.  The Court of Appeals for the Fifth Circuit             
          reversed, holding that before the Commissioner could make a                 
          determination that a taxpayer received unreported income, he                

               9Petitioner does not contend that sec. 7491(a), which shifts           
          the burden of proof to the Commissioner if its requirements are             
          met, applies, and the record does not contain sufficient evidence           
          to establish that petitioner satisfies the sec. 7491(a)                     
          requirements.                                                               
               10This case is appealable, barring a stipulation to the                
          contrary, to the Court of Appeals for the Fifth Circuit.  See               
          sec. 7482(b)(1)(B).                                                         






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