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records that are sufficient to establish their income. Sec.
6001; DiLeo v. Commissioner, 96 T.C. 858, 867 (1991), affd. 959
F.2d 16 (2d Cir. 1992); sec. 1.446-1(a)(4), Income Tax Regs.
When a taxpayer fails to keep adequate books and records, the
Commissioner is authorized to determine the existence and amount
of the taxpayer’s income by any method that clearly reflects
income. Sec. 446(b); Mallette Bros. Constr. Co. v. United
States, 695 F.2d 145, 148 (5th Cir. 1983); Webb v. Commissioner,
394 F.2d 366, 371-372 (5th Cir. 1968), affg. T.C. Memo. 1966-81;
see also Holland v. United States, 348 U.S. 121, 131-132 (1954).
Respondent employed the “bank deposits method” of
reconstructing petitioner’s income for the years at issue as a
means of calculating his tax liability. A bank deposit is prima
facie evidence of income, and the “use of the bank deposits
method for computing unreported income has long been sanctioned
by the courts.” Clayton v. Commissioner, 102 T.C. 632, 645
(1994); see also DiLeo v. Commissioner, supra at 868; Tokarski v.
Commissioner, 87 T.C. 74, 77 (1986); Estate of Mason v.
Commissioner, 64 T.C. 651, 657 (1975), affd. 566 F.2d 2 (6th Cir.
1977). The bank deposits method of reconstruction assumes that
all of the money deposited into a taxpayer’s account is taxable
income unless the taxpayer can show that the deposits are not
taxable. DiLeo v. Commissioner, supra at 868; see also Price v.
United States, 335 F.2d 671, 677 (5th Cir. 1964).
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