-8-
1993), affg. T.C. Memo. 1991-636; Erickson v. Commissioner, 937
F.2d 1548, 1551 (10th Cir. 1991), affg. T.C. Memo. 1989-552. We do
not find that respondent's determinations were arbitrary and thus
do not agree with Ms. Ng's assertion that the burden of proof
should shift to respondent.
Ms. Ng transacted business using large amounts of cash. She
commingled her personal funds with funds of entities she owned or
controlled in her U.S. and Hong Kong bank accounts, and she
commingled the funds of one entity with those of another.
Moreover, she disregarded the legal ownership of the accounts when
writing checks. For example, she deposited into Strong Hope's
checking account rents from property located at 857 Clay Street,
which was owned by Strong Hope Limited (Calif.) and wrote checks
from Strong Hope's checking account to pay expenses of property
located at 1610 Lombard Street which she wholly owned. Ms. Ng
claims she "commingled funds and used cash and cashier's checks on
many occasions out of fear that the respondent or other creditors
would seize her accounts."
Revenue Agent Theresa Martin (the revenue agent) reconstructed
Ms. Ng's income for the years under consideration by analyzing Ms.
Ng's bank deposits and cash expenditures. Use of the bank deposits
and cash expenditures method to reconstruct income is well
established. DiLeo v. Commissioner, 96 T.C. 858, 867 (1991), affd.
959 F.2d 16 (2d Cir. 1992); Parks v. Commissioner, 94 T.C. 654, 658
(1990); Nicholas v. Commissioner, 70 T.C. 1057, 1064 (1978); Estate
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