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provide alternative nontaxable sources for the discrepancy in his
expenditures and his reported income. This explanation commences
respondent's investigative requirements under Holland."
By comparing petitioner's known income with her stated and
known expenditures, respondent determined that petitioner had
$22,696 of unreported income for 1993 and $14,021 of unreported
income for 1994. At trial, respondent conceded that a proper
reconstruction of petitioner's income would not include any
deductions claimed by petitioner but disallowed by respondent.
Petitioner testified that the reason her expenditures
exceeded her stated earnings was because of loans she received.
At trial, respondent conceded that petitioner received $2,200 in
signatory loans. Petitioner argues that the balance of the loans
were personal loans received from her sister, Mrs. Berry and from
a friend Mr. Peavy. Ms. Ranew contacted both Mrs. Berry and Mr.
Peavy, neither of whom provided Ms. Ranew with any further
details as to the amount or dates of the loans. Respondent
argues that petitioner's two businesses, P&G Fashions and Eagle,
were the sources of taxable income.
We conclude that respondent has fulfilled the requirement of
Holland v. Commissioner, supra. Respondent contacted Mrs. Berry
and Mr. Peavy thereby satisfying the requirement that leads to
sources of nontaxable income supplied by the taxpayer be tracked
down. By pointing to P&S Fashions and petitioner's Eagle
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