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1 Respondent conceded before trial that the adjustment for
unreported income for 1992 should be $79,662.11, rather than
$231,212 as determined in the notice of deficiency. Respondent
made additional concessions on brief regarding 1992, as discussed
in the Opinion section, infra.
In the notice of deficiency, respondent disallowed (1)
deductions of $5,200 for 1990, 1991, and 1992 that petitioner
claimed for alimony payments, (2) deductions of $49,685 for 1990
and $104,690 for 1991 (of which $49,685 in 1990 and $45,700 in
1991 was paid to Ms. Stanbery) that petitioner claimed as outside
business expenses for those years, and (3) deductions of $15,600
for 1990 and $10,400 for 1991 that petitioner claimed as business
rental expense. Respondent also disallowed deductions for (1)
$29,530 that petitioner claimed for returns and allowances in
1990, (2) $28,038 of business expenses claimed in 1991 that
petitioner had previously claimed in 1990, and (3) $11,668 for
unsubstantiated business expenses claimed in 1991.
OPINION
Issue I. Whether Petitioner Failed To Report Gross Receipts of
$344,225 for 1990, $666,563 for 1991, and $53,330 for 1992
A taxpayer is required to maintain records sufficient to
show whether or not he is liable for Federal income taxes. Sec.
6001. Where a taxpayer has failed to maintain adequate records,
respondent may reconstruct the taxpayer's income by any
reasonable method that clearly reflects income. Sec. 446;
Holland v. United States, 348 U.S. 121, 130-132 (1954). The bank
deposits method has long been approved by the courts as a method
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