- 14 -
Commissioner, 979 F.2d 1176, 1178 (6th Cir. 1992), affg. T.C.
Memo. 1991-320; Traficant v. Commissioner, 884 F.2d 258, 263 (6th
Cir. 1989), affg. 89 T.C. 501 (1987); Calderone v. United States,
799 F.2d 254, 258 (6th Cir. 1986). A taxpayer must generally
prove by a preponderance of the evidence that respondent’s
determination is erroneous. Helvering v. Taylor, supra at 515;
Traficant v. Commissioner, supra at 263; Calderone v. United
States, supra at 258.
Income is computed under the net worth method by determining
a taxpayer's net worth at the beginning and end of a taxable
year. The difference between those two amounts is the increase
in the taxpayer’s net worth. This difference is increased by
adding nondeductible expenditures, e.g., living expenses, and by
subtracting gifts, inheritances, loans, and other nontaxable
receipts. Holland v. United States, supra at 125; United States
v. Giacalone, 574 F.2d 328, 330-331 (6th Cir. 1978). An increase
in a taxpayer's net worth, plus his or her nondeductible
expenditures, less nontaxable receipts, may be considered taxable
income. Holland v. United States, supra.
Petitioners argue primarily that respondent's use of the net
worth method was inappropriate because, they assert, they
maintained sufficient records as to their income. We disagree.
First, as a point of fact, petitioners did not maintain
sufficient records from which respondent could accurately compute
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