Court Opinion

ID: 9456534
Source: CourtListenerOpinion
Date Created: 2023-08-04 19:55:52.942559+00
Date Added: 2024-06-11T17:35:00.917624
License: Public Domain

BIGGS, Circuit Judge (dissenting).
In a case, such as the instant case, where the Commissioner has assessed a deficiency on the basis of unreported income, the burden of proof is on the Commissioner to show that the taxpayer received income. This burden is initially satisfied by the presumption that the Commissioner’s deficiency determination is correct. The burden is thus on the taxpayer to prove the incorrectness of the deficiency determination. This burden is procedural and is met if the taxpayer produces competent and relevant evidence from which it could be found that he did not receive the income alleged in the deficiency notice. Foster v. Commissioner of Internal Revenue, 391 F.2d 727 (4 Cir. 1968); Herbert v. Commissioner of Internal Revenue, 377 F.2d 65 (9 Cir. 1966); Weir v. Commissioner of Internal Revenue, 283 F.2d 675 (6 Cir. 1960).1 If this burden is met by the taxpayer the burden of proof shifts *495back to the Commissioner to prove the existence and amount of the deficiency. In order for the Commissioner to satisfy this burden, he must prove that the amount paid to the foundation was made pursuant to an agreement or understanding between the taxpayer and the donor. Treasury Regulation 1.61-2 (c).2
In this case, the uncontradicted testimony of appellant’s witnesses that the transfer by Albert to the Baird Foundation was not in consideration for services performed by Baird in connection with the Bellanca-L. Albert & Sons transaction or for past or future services was adequate to overcome the presumption of correctness which attached to the Commissioner’s deficiency determination. Thus, this uncontradieted evidence3 is such competent and relevant evidence from which it could be found that Baird received no income with respect to the transfer from Albert to the Baird Foundation. The burden of proof then shifted to the Commissioner to establish the requisite “agreement or understanding.” Since the record is devoid of any evidence showing an “agreement or understanding, I would hold that the Commissioner did not meet its burden.
I conclude that the judgment should be reversed and the case remanded to the Tax Court with instructions to enter judgment for the appellant.
For the reasons stated, I respectfully dissent.

. In Weir, petitioner was President and principal stockholder of a number of corporations during the years 1945-49. During these years, numerous checks on the corporation were issued to various persons. The I.R.S. found that these checks were issued for the personal benefit of the petitioner. The petitioner contended that these checks were issued for the benefit of the corporations, and testified that he liad received no personal benefit from the issuance of the chocks. After the Tax Court found that the checks constituted taxable income to the petitioner, the Court of *495Appeals reversed using the following language at page 679:
“The law imposes much less of a burden upon a taxpayer who is called upon to prove a negative — that he did not receive the income which the Commissioner claims — than it imposes upon a taxpayer who is attempting to sustain a deduction on his income tax return. One reason for this is that * * * deductions are matters of legislative grace, and the burden of proving them and their correct amount rests upon the taxpayers, entirely aside from the consideration of any presumption of correctness that attaches to the Commissioner’s determination, and that the application of the same rule to the testimony that a taxpayer did not receive income, as to a taxpayer’s claim for deduction on his income tax return, would invert the ordinary rules of procedure, as Judge Learned Hand pointed out in Taylor v. Commissioner [of Internal Revenue], 2 Cir., 70 F.2d 619, 621, affirmed 293 U.S. 507, 55 S.Ct. 287, 79 L.Ed. 623.”
The Court further asserts that after the petitioner clearly testified that he never received any personal benefit from the checks issued by the corporations, it was unnecessary for him to testify as to the purpose for which the checks had been issued:
“By his complete denial that he received any benefit from the checks, he overcame whatever presumption arises from the Commissioner’s determination; and it is not necessary for him to go further and affirmatively show the purpose for which the checks were actually issued, or to prove the correct amount of the tax due, in order to nullify the Commissioner’s statement of deficiency.” (Citations omitted). 283 F.2d at 681-682.

. See note 5 cited to the text in the majority opinion for the text of this regulation.

. The Commissioner’s only witness, Ilan-sell, testified that, to his knowledge, Baird did not receive anything in connection with the Bellanca-L. Albert & Sons deal.