- 20 -
both deposited into bank accounts and spent by the taxpayer. See
generally United States v. Abodeely, supra.
When the Commissioner has the burden of proof, the
Commissioner may either connect the deposits and expenditures to
a likely source of income, or, where the taxpayer alleges a
nontaxable source, negate each nontaxable source alleged by the
taxpayer; the Commissioner need not do both. United States v.
Massei, 355 U.S. 595 (1958); see DiLeo v. Commissioner, 96 T.C.
858, 873 (1991), affd. 959 F.2d 16 (2d Cir. 1992). Petitioner
maintains that respondent has neither proven a likely source of
income nor negated nontaxable sources. Respondent, on the other
hand, claims to have done both by a preponderance of the
evidence.
A. Likely Source of Income
Respondent asserts that a likely source of income for
petitioner during 1989 and 1990 is money that petitioner
wrongfully appropriated from his father's marijuana activity.
(Respondent's agent acknowledged at trial that the adjustments to
gross income determined in the notice of deficiency could not
have been derived from petitioner's unsuccessful dog kennel
business.)
As part of the stipulation of facts, petitioner objected to
the admission of Exhibits P, S, T, U, AB, and AD offered by
respondent, which purport to relate to the issue of a likely
source of income. We postponed ruling on petitioner's objections
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011