- 27 -- 27 -
T.C. at 77. Neither respondent's statement in the notice as to
the assumed source for the deposits that she determined to be
income on the basis of the bank deposits method nor respondent's
argument at trial and on brief that petitioners have unreported
income for 1989 and 1990 resulting from the deposits of misappro-
priated funds alters those principles.
Respondent's statement in the notice of her assumption as to
the source (i.e., "real estate sales of a general contracting
business" or "from contracting") for the deposits that she
determined constitute unreported income was not part of, and was
not essential to, respondent's theory in the notice that, under
the bank deposits method, all money deposited into petitioners'
accounts during 1989 and 1990 constitutes income (except money so
deposited that respondent knows (1) is not taxable or (2) is
income that petitioners previously reported in their returns for
those years). Clayton v. Commissioner, supra at 645-646; DiLeo
v. Commissioner, 96 T.C. at 868. Respondent's argument at trial
and on brief that petitioners have unreported income for 1989 and
1990 resulting from the deposits of misappropriated funds is not
inconsistent with, and merely serves to develop, that theory.
We view differently petitioners' contention that respondent
raised a matter as to which respondent bears the burden of proof
in arguing at trial and on brief that petitioners have unreported
income for 1990 from the discharge of the outstanding balances of
the Kabeiseman loans. For the reasons stated above, petitioners
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