                       T.C. Memo. 2001-308



                     UNITED STATES TAX COURT



                LAUREL ANN CURTIS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*



     Docket No. 11125-95.                 Filed December 3, 2001.



          On remand from the Court of Appeals for the Ninth
     Circuit to elaborate the evidence relied on by the
     Court in Curtis v. Commissioner, T.C. Memo. 1996-484,
     revd. and remanded without published opinion 232 F.3d
     893 (9th Cir. 2000), to conclude that respondent had
     provided the minimal evidentiary foundation supporting
     his determination of unreported income. See
     Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir.
     1979), revg. 67 T.C. 672 (1977).
          Held: Findings made to support conclusion that
     proper foundation exists.




     *
        This opinion supplements Curtis v. Commissioner, T.C.
Memo. 1996-484, revd. and remanded without published opinion 232
F.3d 893 (9th Cir. 2000).
                               - 2 -

     Laurel Ann Curtis, pro se.

     Brenda M. Fitzgerald, for respondent.



      SUPPLEMENTAL MEMORANDUM FINDINGS OF FACT AND OPINION


     HALPERN, Judge:   This case has been remanded by the Court of

Appeals for the Ninth Circuit (sometimes the Court of Appeals).

Our original report is Curtis v. Commissioner, T.C. Memo. 1996-

484 (the original report), revd. and remanded without published

opinion 232 F.3d 893 (9th Cir. 2000).   In the original report, we

sustained respondent’s determinations of deficiencies in Federal

income tax for petitioner’s taxable years 1983 through 1993, as

well as respondent’s determinations of additions to tax for each

of those years under sections 6651(a)(1) (failure to file return)

and 6654(a) (failure to pay estimated tax).    We also found that

petitioner’s position in this case was both frivolous and

groundless, and that petitioner had undertaken certain actions

primarily for delay.   On account thereof, we imposed a penalty on

petitioner under section 6673(a)(1).

     This case involves unreported income.    In the original

report, we recognized that any appeal would likely lie to the

Court of Appeals for the Ninth Circuit.   We stated:

          The general rule is that the burden of proof is
     upon petitioner, Rule 142(a), which she must carry by a
     preponderance of the evidence, e.g., Schaffer v.
     Commissioner, 779 F.2d 849, 858 (2d Cir. 1985), affg.
     in part and remanding Mandina v. Commissioner, T.C.
                               - 3 -

     Memo. 1982-34. * * *    Under Weimerskirch v.
     Commissioner, 596 F.2d 358 (9th Cir. 1979), revg. 67
     T.C. 672 (1977), to which we defer in accordance with
     the doctrine of Golsen v. Commissioner, 54 T.C. 742
     (1970), affd. 445 F.2d 985 (10th Cir. 1971), we must
     examine the record to determine whether there is a
     minimal evidentiary foundation supporting respondent’s
     determination of unreported income. If there is not,
     respondent’s determination will be deemed arbitrary
     and, consequently, she will lose her presumption of
     correctness and will be forced to go forward with the
     evidence. Weimerskirch v. Commissioner, supra. The
     record, however, does contain evidence supporting
     respondent’s determination of unreported income, and,
     therefore, the burden of proof remains entirely with
     petitioner.

Commissioner v. Curtis, supra (fn. ref. omitted).    The Court of

Appeals remanded for us to elaborate on the evidence supporting

respondent’s determination of unreported income.    We shall make

certain findings of fact and then discuss our basis for

concluding that the record does contain evidence supporting

respondent’s determination of unreported income.

     Unless otherwise noted, all section references are to the

Internal Revenue Code in effect for the years in issue, and all

Rule references are to the Tax Court Rules of Practice and

Procedure.

                         FINDINGS OF FACT

Petitioner’s Acquisition of Rental Properties

     In 1970, petitioner began to acquire real estate.    In

petitioner’s posttrial memorandum (the posttrial memorandum), she

states:   “By 1970 I had enough to make the down payment on a
                                - 4 -

4-plex.    I kept working two jobs and bought more property.”     In

1996, petitioner owned at least two rental properties.

Petitioner’s Decision Not To File Income Tax Returns

     In the early 1980s, petitioner became convinced that the

Federal income tax is voluntary.    Before 1984, petitioner filed

income tax returns, reporting wage and rental income, although,

because of deductions, she had little taxable income and paid

little tax.    In 1984, petitioner made the decision not to file a

return.    In the posttrial memorandum, petitioner claims:   “I

sincerely believed then as I do now there is no dispute the

Pollock decision says real estate rents could not be subject to a

mandatory income tax.”1

     Petitioner did not file Federal income tax returns for her

taxable (calendar) years 1983 through 1993, the years here in

issue.

Respondent’s Examination

     In 1992, one of respondent’s agents learned that, in 1990,

petitioner had expended $8,000 for an automobile.    The agent

asked to meet with petitioner so she could explain the lack of

returns.    Petitioner was requested to file delinquent returns.


     1
        Apparently, petitioner is referring to Pollock v.
Farmers’ Loan & Trust Co., 158 U.S. 601 (1895), striking down the
income tax enacted in 1894 as a direct tax not apportioned among
the States in conformity with the Constitution. The modern
income tax is not vulnerable to that attack. See U.S. Const.
amend. XVI; see also Brushaber v. Union Pac. R.R., 240 U.S. 1,
17-18 (1916).
                                - 5 -

Petitioner refused to file delinquent returns because, in her own

words:

     I could not truthfully and in good conscience sign a
     return which swore that the information was correct
     when I didn’t know it was. For a decade I’d not kept
     records for tax purposes and the records I had
     available probably were not complete and I would not
     swear that they were.

     On March 20, 1995, respondent issued the four notices of

deficiency that give rise to this case (one each for 1983 through

1985, 1986 through 1988, 1989 through 1991, and 1992 and 1993

(collectively, the notices of deficiency).

The Petition

     Petitioner filed the petition on June 22, 1995.   By the

petition, she assigns error to all of the determinations of

deficiencies in, and additions to, tax made by respondent in the

notices of deficiency, and she sets forth the following

disagreement with respondent:

          I disagree with The “increase in Tax” & The
     “Penalties” in each year, 1983 through 1993 for the
     reason that more income than I earned was attributed to
     me in each of those years & far less expense than I
     incurred & am allowed to deduct was given in each of
     those years.

Petitioner attached to the petition only the first page of each

of the notices of deficiency she received.   Each of those pages

states, among other things (1) the amount of the deficiency in

tax and the penalty determined by respondent for each of the

years stated, (2) that an enclosed statement shows how respondent
                               - 6 -

figured the deficiencies set forth, and (3) that any petition to

the Tax Court be accompanied by “a copy of this letter and a copy

of all statements and schedules you received with this letter”.

The Posttrial Memorandum

     Petitioner has attached as Exhibit A to the posttrial

memorandum two pages that accompanied the notice of deficiency

for 1992 and 1993.   Those pages set forth respondent’s

adjustments, increasing petitioner’s rental income, “Per Audit”,

in the amounts of $98,180 and $85,620, for 1992 and 1993,

respectively.   There is a schedule setting forth the addresses of

the rental properties in question, along with amounts of rental

income, rental expenses, and depreciation, for each.   The

following explanation follows immediately upon the statement of

adjustments:

     It is determined that you received gross income from
     rental income as shown above. The gross income amounts
     have been determined according to the information
     available, including information provided by the payers
     of rental income and/or third party recordkeepers.

Respondent’s Counsel’s Communication to Petitioner

     Brenda M. Fitzgerald is respondent’s counsel in this case.

By letter dated February 7, 1996, Ms. Fitzgerald answered

petitioner’s request that respondent provide her with specific

sources and amounts from which respondent computed petitioner’s

deficiencies for each year.   Ms. Fitzgerald enclosed with her

letter a summary for each year of the figures associated with
                                - 7 -

each parcel of real estate of which respondent was aware.    She

added:    “If you require additional information, please let me

know.”

Petitioner’s Motion for Sanctions

     On May 16, 1996, we filed petitioner’s motion for sanctions

against respondent for failure to litigate in good faith (the

motion for sanctions), which we denied.    Exhibit H accompanying

the motion for sanctions purports to be a transcript (the

transcript) of a meeting held on April 24, 1996, among

petitioner, one of respondent’s agents, and another individual.

In the transcript, petitioner acknowledges receiving from

respondent a breakdown of figures by property.    She also appears

to acknowledge that respondent’s agents had contacted her former

tenants to determine rents paid to her:    “Well, they were willing

to contact former tenants, but they weren’t willing to call, for

example, the Multnomah County Tax Assessor.    * * *   I mean they

really didn’t endeavor to find anything that wasn’t detrimental

to me.”

Petitioner’s Discovery

     Petitioner attempted both informal and formal discovery and

requested admissions from respondent (without distinction,

petitioner’s discovery requests).    With few exceptions,

petitioner’s discovery requests did not seek information about or

concerning the adjustments made by respondent in the notices of
                                 - 8 -

deficiency.   Petitioner’s discovery requests addressed

constitutional and legal issues that have been settled in the

Commissioner’s favor or asked for information outside the scope

of discovery.   For example, petitioner’s interrogatories contain

the following question:    “Is there an IRS Code Section that would

establish a liability for an income tax?”     Among her document

requests is the following:    “Please provide me with (or identify)

the Code Section that requires me to keep books and records for

income tax purposes.”

Petitioner’s Acknowledgment of Rental Income

     On April 19, 1996, we filed petitioner’s motion to dismiss,

which we denied.   In the motion to dismiss, petitioner

acknowledges her receipt of rental income.     She claims:   “SINCE

ALL OF THE ‘INCOME’ AT ISSUE WAS DERIVED FROM RENT, HOW CAN

POLLOCK V. FARMERS LOAN AND TRUST CO.    * * *   NOT BE RELEVANT TO

THE FACTS IN THIS CASE?”     She concedes:   “all of the ‘income’ at

issue is from ‘rent’ or ‘income’ from real estate”.     She argues

that respondent is seeking to impose an income tax “on the rent

Petitioner derives from real estate”.    She argues that respondent

“[is] attempt[ing] to put an income tax on Petitioner’s rental

income”.

     Accompanying the motion for sanctions is an Exhibit G, a

letter from petitioner to respondent’s counsel, dated April 12,

1996, in which petitioner acknowledges her ownership of rental
                                - 9 -

property.    In that letter, in the course of making her

constitutional argument, she states:      “Both Pollock and Brushaber

support this conclusion and imposed the income tax on ‘wages,

salaries and profits from other activities’.     I have no wages,

salaries or profits from my rental property.”      (Emphasis added.)

      Petitioner refused to stipulate respondent’s proposed

findings of fact, stating that respondent’s figures for gross

income were “grossly inflated”.

      In the posttrial memorandum, petitioner states, as a point

of law:    “Petitioner’s real estate rents are not subject to an

income tax as a matter of law.”    She argues:   “I honestly truly

believe that the income tax is voluntary and that I had no

legally defined income and that an unapportioned income tax can

not be levied on real estate rents.”

                               OPINION

I.   Relevant Authority

      A.   Weimerskirch v. Commissioner

      In Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir.

1979), revg. 67 T.C. 672 (1977), the Court of Appeals first

stated that, in an unreported income case, before the

Commissioner may enjoy the presumption of correctness that

results from the burden of proof’s being borne by the taxpayer

(hereafter, the presumption of correctness), the Commissioner

must offer some substantive evidence linking the taxpayer to an
                               - 10 -

income-generating activity.   The rule is based on the assumption

that a taxpayer may have difficulty proving that he did not

receive unreported income.    See Karme v. Commissioner, 673 F.2d

1062, 1065 (9th Cir. 1982) (“the taxpayer may face practical

difficulties in attempting to refute the Commissioner’s assertion

that the taxpayer received unreported income” (original quotation

marks omitted)), affg. 73 T.C. 1163 (1980).   The rule is

satisfied if the Commissioner provides a “minimal evidentiary

foundation” linking the taxpayer with the source of the income in

question.   Weimerskirch v. Commissioner, supra at 361; see also

Palmer v. United States, 116 F.3d 1309, 1313 (9th Cir. 1997).2


     2
        It appears that, in the Court of Appeals for the Ninth
Circuit (the Court of Appeals), under the line of cases beginning
with Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir. 1979),
revg. 67 T.C. 672 (1977), the burden is on the Commissioner to
show the link between the taxpayer and the source of the supposed
income. See, e.g., Palmer v. United States, 116 F.3d 1309, 1313
(9th Cir. 1997) (“Where the IRS bases its assessment on an
allegation of unreported income, the Service must show some
minimal evidence linking the taxpayer to the source of that
income before the presumption of correctness will attach.”). In
cases of unreported income governed by the jurisprudence of this
Court (going behind the notice of deficiency only “[o]n rare
occasions” involving “unreported illegal income”, Shriver v.
Commissioner, 85 T.C. 1, 3 (1985) (emphasis added)), we have held
that it is the taxpayer who has the burden of showing that the
Commissioner has failed to link him with some illegal income-
generating activity. See id.; see also, e.g., McWilliams v.
Commissioner, T.C. Memo. 1995-454; Jones v. Commissioner, T.C.
Memo. 1994-230, affd. per curiam 68 F.3d 460 (4th Cir. 1995);
Schaeffer v. Commissioner, T.C. Memo. 1994-206; Franklin v.
Commissioner, T.C. Memo. 1993-184; Dooley v. Commissioner, T.C.
Memo. 1992-39; Chagra v. Commissioner, T.C. Memo. 1991-366, affd.
without published opinion 990 F.2d 1250 (2d Cir. 1993). Of
course, under the doctrine of Golsen v. Commissioner, 54 T.C. 742
                                                   (continued...)
                             - 11 -



     2
      (...continued)
(1970), affd. 445 F.2d 985 (10th Cir. 1971), in cases going to
the Court of Appeals, to be governed by the Weimerskirch line of
cases, we defer to the Court of Appeals’ allocation to the
Commissioner of the burden of proof with respect to the necessary
minimal foundation. We offer the following remarks,
nevertheless, for consideration by the Court of Appeals.

    The rule first stated in Weimerskirch results from the Court
of Appeals interpretation of United States v. Janis, 428 U.S.
433, 441 (1976), a combination refund and collection case,
wherein the Supreme Court held that an assessment of tax is a
“naked assessment”, and not subject to the usual rule imposing
the burden of proof in tax cases on the taxpayer, if the
assessment is “without rational foundation and excessive”. See
Foster v. Commissioner, 756 F.2d 1430, 1439 (9th Cir. 1985),
affg. in part and vacating in part 80 T.C. 34 (1983); see also
Estate of Magnin v. Commissioner, 184 F.3d 1074, 1081 (9th Cir.
1999), revg. and remanding T.C. Memo. 1996-25. In Janis, the
Supreme Court stated that, notwithstanding some debate among the
Courts of Appeals as to the allocation of the burden of proof in
a tax case when there is positive evidence that the assessment is
incorrect, there was no debate among the Courts of Appeals that,
where the assessment is shown to be naked and without any
foundation, the rule to be applied is the rule of Helvering v.
Taylor, 293 U.S. 507 (1935). In Helvering v. Taylor, supra at
514, the Supreme Court held that an invalid determination of tax
(one that is without rational foundation and excessive) may be
set aside notwithstanding that the taxpayer does not show the
correct amount (if any) of tax. The Court added:
“Unquestionably the burden of proof is on the taxpayer to show
that the Commissioner’s determination is invalid.” Id. at 515.

     The Court of Appeals’ placement on the Commissioner of the
burden to construct a minimal evidentiary foundation linking the
taxpayer with the source of any unreported income appears
inconsistent with the quoted language from Taylor. It is
inconsistent with the general rule in deficiency cases that the
taxpayer bears the burden of proof, see Welch v. Helvering, 290
U.S. 111, 115 (1933), and in refund cases that the taxpayer bears
the burden of showing the amount that he is owed, see United
States v. Janis, supra at 440. It is also inconsistent with
Congress’s intent as expressed in sec. 7491, which was added to
the Code by the Internal Revenue Service Restructuring and Reform
Act of 1998, Pub. L. 105-206, sec. 3001(c)(2), 112 Stat. 685,
                                                   (continued...)
                                - 12 -

     B.     Minimal Evidentiary Foundation

         The Court of Appeals has not specified generally what

constitutes the required minimal evidentiary foundation.

Apparently, however, unless the taxpayer challenges the

Commissioner’s determination of a deficiency in tax on the

merits, the Commissioner need not provide any such foundation.

See Roat v. Commissioner, 847 F.2d 1379, 1383 (9th Cir. 1988)

(sustaining order of Tax Court dismissing taxpayers’ case for

failure to prosecute).

     In Rapp v. Commissioner, 774 F.2d 932 (9th Cir. 1985), which

appears to involve unreported income from employment, the sale of

a residence, and a business, the only evidence the Commissioner

introduced consisted of documents the Commissioner had himself



     2
      (...continued)
727, and which is effective with respect to examinations
commenced after July 22, 1998 (and which is, therefore, of no
application to this case). In general, and if certain
prerequisites are satisfied, then, with respect to any factual
issue relevant to ascertaining the liability of a taxpayer for
any tax, the burden of proof with respect to that issue is on the
Government, but only if the taxpayer introduces credible evidence
with respect to that issue. Sec. 7491(a)(1).

     The Court of Appeals has not explained its reason for
burdening the Commissioner with the obligation to show his basis
for charging the taxpayer with unreported income. It cannot be
that a taxpayer is without resources, through discovery or
otherwise, to determine that the Commissioner had no such basis
(if, indeed, he did not). Presumably, a determination of
deficiency without basis in fact is invalid. In Helvering v.
Taylor, supra at 514, the Supreme Court said that it was
“unquestionably” the burden of the taxpayer to show such
invalidity.
                               - 13 -

created; i.e., deficiency notices, summonses, certain tax forms

prepared by the Commissioner, and documents showing the tax

calculations on which the deficiencies were based.     Id. at 935.

Despite the fact that, as in the instant case, no underlying

third-party records were introduced linking the taxpayers with

any income-producing activity, the Commissioner was entitled to

rely on the presumption of correctness because the taxpayers did

not directly attack that presumption.    Id.   The Court of Appeals

took into account the fact that, in their petition, the Rapps had

alleged “as one ground of error that the Commissioner failed to

consider or allow for ‘legitimate and proper deductions.’”       Id.

The Court of Appeals took the claim for deductions as evidence

that there was a source of related income:     “The connection

between the Rapps and income-producing activity is sufficiently

acknowledged to permit the presumption of correctness to attach

to the Commissioner’s determination.”    Id.

     In Palmer v. United States, 116 F.3d 1309 (9th Cir. 1997),

the taxpayers (husband and wife) had failed to report income for

4 successive years.   The Commissioner investigated and found

information that the taxpayer-husband, a self-employed

electrician, had worked for wages in years 1 and 4; respondent

found no information relating to specific employment during years

2 and 3.   Id. at 1313.   Nevertheless, the Commissioner determined

deficiencies in tax for years 2 and 3, using his reconstruction
                             - 14 -

of the taxpayers’ income for those years.     Id.   The

Commissioner’s reconstruction was based on certain average income

statistics and the inference that, since the taxpayers were able

to survive from the end of year 1 to year 4, they must have had

some income during the intervening 2 years.     Id.     The taxpayers

did not suggest that they had alternative means of support in the

absence of income for the years in question, and the court found

the Commissioner’s inference to be reasonable.        Id.   The

taxpayers argued, however, that, under the Weimerskirch line of

cases, the Commissioner was compelled to discover the exact

source of the income that he would attribute to them.         Id.   The

Court of Appeals disagreed, stating that, when the reasonable

inference made by the Commissioner was coupled with the

information linking the taxpayer-husband to wages for at least a

part of the 4-year period, the minimal evidentiary foundation

necessary to support the presumption of correctness had been

established.   Id.

     Finally, in Edwards v. Commissioner, 680 F.2d 1268 (9th Cir.

1982), the Court of Appeals upheld the presumption of correctness

even though no specific income was documented, because the

taxpayers there had conceded that they owned an income-generating

auto repair business during the years at issue.
                              - 15 -

II.   Discussion

      Petitioner failed to file income tax returns for the years

in question, and respondent was obliged to look to other sources

to determine whether petitioner owed any income taxes.

Respondent determined that petitioner did owe taxes and issued

the notices of deficiency.   Petitioner assigned only the

following error:   “more income than I earned was attributed to me

in each of * * * [the years in question] & far less expense than

I incurred & am allowed to deduct was given in each of those

years.”   Petitioner averred no specific facts in support of her

assignment of error and did not claim explicitly that

respondent’s determinations were arbitrary, erroneous, or

unsupported by minimal evidence.   Petitioner attached to the

petition the first page of each of the notices of deficiency.

Those first pages show, among other things, the amount of the

deficiency and penalties for each year covered by that particular

notice.   Each first page clearly instructs the recipient to

include with any petition to the Tax Court “a copy of all

statements and schedules you received with this letter”.     Rule

34(b)(8) likewise requires such statements and schedules to be

attached to a petition.   Petitioner failed to include any

statement or schedule with the petition.   Since petitioner

attached to her posttrial memorandum as Exhibit A two pages that

accompanied the notice of deficiency for 1992 and 1993, we know
                              - 16 -

that, for 1992 and 1993, those accompanying pages exist and were

received by petitioner.   Those pages identify as rental income

the type of income that petitioner failed to report, state the

addresses of the particular rental properties in question,

identify an amount with respect to each such property, and

explain that respondent determined those amounts from available

information, including information provided by the payers of that

rental income and third-party recordkeepers.    We assume that

similar information accompanied the notices for the other years

in question, which petitioner failed to attach to the petition.

Indeed, among petitioner’s requests for admissions, petitioner

requests that respondent:   “Admit or deny that the ‘rental

income’ stated in all Notices of Deficiency is an estimate.”

(Emphasis added.)   Although not free from ambiguity, that request

supports our assumption that petitioner received the same type of

information for all of the years in issue.   In any event, after

the petition was filed, and before this case came on for trial,

respondent’s counsel provided to petitioner a summary for each

year in issue of the rental amounts associated with each parcel

of real estate of which respondent was aware.

     We think that the notices of deficiency, together with the

petition and the summary provided to petitioner by respondent’s

counsel, provide the minimal evidentiary foundation required by

Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir. 1979).      We
                                - 17 -

look to Karme v. Commissioner, 673 F.2d at 1065, for guidance as

to the purpose served by such a minimal evidentiary foundation:

“the taxpayer may face practical difficulties in attempting to

refute the Commissioner’s assertion that the taxpayer received

unreported income.”    By the time this case came to trial (indeed

upon receipt of the notices of deficiency), petitioner was

informed that respondent had determined that petitioner had

unreported income from real estate, the addresses of the real

estate in question, the amounts of the omitted income, and the

sources of respondent’s information.     Petitioner faced no

practical difficulties in determining precisely what she had to

prove to sustain her assignment of error that “more income than I

earned was attributed to me”.    She had to prove that she did not

own the specific properties in question, did not receive rents in

the amounts alleged, or had deductions greater than had been

allowed.    True, respondent introduced no third-party records

substantiating his claims that petitioner owned rental properties

and received rents from them.    We assume that the reason he did

not, however, was that in the petition, petitioner did not aver

that respondent had failed to link her to an income-producing

activity.    The situation here is the same as in Rapp v.

Commissioner, 774 F.2d 932 (9th Cir. 1985), where the

Commissioner did not introduce underlying third-party records,

but the Court of Appeals allowed the Commissioner to rely on the
                              - 18 -

presumption of correctness since the taxpayer did not directly

attack that presumption.   Also as in Rapp, petitioner challenged

the amount of related deductions respondent had allowed her,

which we view as an implicit acknowledgment of the existence of

the income-producing property.    Rapp lends support to our

conclusion that respondent did establish a minimum evidentiary

foundation.

     Moreover, in the various documents petitioner has filed in

this case, she makes statements that we read as her concession

that, during the years in issue, she did, indeed, own real

property from which she received rental income:   To wit, “ALL OF

THE ‘INCOME’ AT ISSUE WAS DERIVED FROM RENT”; “[respondent is]

attempt[ing] to put an income tax on Petitioner’s rental income”;

“Petitioner’s real estate rents are not subject to an income tax

as a matter of law”; “Well, they were willing to contact former

tenants, but they weren’t willing to call, for example, the

Multnomah County Tax Assessor”;   “I have no wages, salaries or

profits from my rental property”.   In Edwards v. Commissioner,

680 F.2d 1268 (9th Cir. 1982), although no specific income was

documented, the Court of Appeals upheld the presumption of

correctness because the taxpayers had conceded that they owned an

income-producing business.   We think that a like result is called

for here.
                              - 19 -

     Finally, we think that Palmer v. United States, 116 F.3d

1309 (9th Cir. 1997), provides added authority for our decision.

In Palmer, the Commissioner had established the taxpayer’s

income-earning capacity but had no information as to income

earned during the middle 2 of the 4 years in question.     The

Commissioner reconstructed the taxpayer’s income for the middle

2 years using average income statistics and the inference that

the taxpayer had survived the middle 2 years on income earned

during those years.   Given the taxpayer’s failure to suggest an

alternative means of support, the Court of Appeals thought the

Commissioner’s inference to be reasonable.    That reasonable

inference, together with the link the Commissioner had shown to

an income-earning capacity, provided the minimal evidentiary

foundation required by the Court of Appeals.    Here, we have found

that petitioner owned rental real estate both before and after

the years in question.   Petitioner has not suggested an

alternative means of support during the intervening years, so we

think it a reasonable inference that she survived those years

using income earned during them.   That reasonable inference,

coupled with her income-earning capacity (from rental real

estate), provides a minimal evidentiary foundation linking

petitioner to an income-producing activity.
                                  - 20 -

III.       Conclusion

       We believe that respondent has provided the required minimal

evidentiary foundation linking petitioner to an income-producing

activity.       We shall reenter our order and decision in this case.3


                                             An appropriate order and

                                        decision will be entered.




       3
        We remain convinced that a penalty under sec. 6673(a)(1)
is deserved. In the main, petitioner’s response to respondent’s
determination of deficiencies has been to make frivolous or
groundless responses, undertaken, we believe, primarily for
delay. Petitioner has asserted absurd, discredited, and
misguided tax-protester arguments such as the following: (1) The
Internal Revenue Code does not make anyone “liable” for an income
tax, (2) the Internal Revenue Code contains no mandatory
provisions, and therefore, compliance is voluntary, (3) the Tax
Court has no authority to decide matters of law or constitutional
issues, and (4) an income tax on petitioner’s rents pursuant to
Pollock v. Farmers’ Loan & Trust Co., 158 U.S. 601 (1895), is an
unapportioned direct tax. Whether respondent had a basis for his
determinations or not (and we believe that he did), those
responses are without merit and inappropriate, and petitioner has
caused unnecessary work for both respondent and this Court.
