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capacity." After respondent showed her a deed which indicated
that she had owned the property prior to December 23, 1987, and
respondent asked if the deed refreshed her memory, she replied,
"No, it doesn't." When questioned further, she finally admitted
that she had owned the property, but she asserted, "I haven't
even been on that property."
We find no flaw in respondent's reconstruction of
petitioners' income using the bank deposits method, and
petitioners have pointed to none. The use of the bank deposits
method for computing income has long been sanctioned by the
courts. When a taxpayer keeps no books or records and has large
bank deposits, the Commissioner is not arbitrary or capricious in
resorting to the bank deposits method. DiLeo v. Commissioner, 96
T.C. 858, 867 (1991), affd. 959 F.2d 16 (2d Cir. 1992). Because
petitioners failed to produce books and records, respondent
reconstructed income from petitioners' bank deposits. Respondent
added petitioners' deposits together, identified any deposits
which represented interaccount transfers, and subtracted the
known funds that petitioners had available during the years for
deposit. Petitioners have failed to show that respondent
improperly reconstructed their gross income.
Petitioners, while bearing the burden of proof, Rule 142,
have introduced no credible evidence that disproves any element
of respondent's deficiency determination--no books or records and
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