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limited information that the revenue agent was able to obtain
with respect to certain of those deposits, that agent excluded
from the calculation of petitioners' unreported income for those
years those deposits that that agent concluded were not taxable
(e.g., credit card advances) or that that agent concluded had
been reported by petitioners in Schedules C of their 1989 and
1990 returns.8
In the notice of deficiency (notice), respondent determined
that deposits into petitioners' accounts during the years 1989
and 1990 in the amounts of $817,214 and $319,904, respectively,
constitute unreported income. The notice further stated in
pertinent part:
It is determined that the taxpayer received gross
income from real estate sales of a general contracting
business for the tax years 1989 and 1990 which was not
reported on the returns. The gross income amounts have
been reconstructed according to the information avail-
able, including information from the Washington County
8 By way of illustration, in reconstructing petitioners' income
for the years at issue on the basis of the bank deposits method,
the revenue agent excluded from the calculation of petitioners'
unreported income for those years the following deposits into
petitioners' account at Washington Federal that that agent con-
cluded were deposits of amounts that were paid to petitioner in
connection with the sales of certain real properties that had
been reported in Schedules C of petitioners' 1989 and 1990 re-
turns:
Date of Amount of
Deposit Deposit
Jan. 17, 1989 $6,970.84
Feb. 22, 1989 15,608.58
May 3, 1989 14,747.67
June 1, 1989 10,794.10
Apr. 3, 1990 46,056.93
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