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Miscellaneous Deposits
The parties agree that the total amounts of miscellaneous
deposits that remain at issue for 1989 and 1990 are $83,364 and
$41,583.71, respectively. Petitioners agree that those deposits
are prima facie evidence of income and that they bear the burden
of proving that respondent's determinations of unreported income
for the years 1989 and 1990 based on those deposits are errone-
ous. See Clayton v. Commissioner, 102 T.C. at 645; DiLeo v.
Commissioner, 96 T.C. at 869; Tokarski v. Commissioner, 87 T.C.
at 77.
Although petitioners' argument is not altogether clear, they
appear to argue that the miscellaneous deposits at issue for 1989
and 1990 do not constitute unreported income for those years
because they represent gross receipts derived from the operations
of petitioner's sole proprietorship Charles Harp Construction
that petitioners reported in Schedule C of their return for each
29(...continued)
such an allegation from the complaint in the lawsuit does not
establish that those funds are not taxable to petitioners. In
fact, with respect to petitioner's deposits during 1989 and 1990
of K & H's construction loan proceeds, the record does not indi-
cate that Mr. Kabeiseman had any knowledge at any time throughout
the course of the years at issue of petitioner's practice of
retaining a portion of those proceeds. Even assuming arguendo
that we were to construe the settlement agreement as encompassing
a repayment of a portion of K & H's construction loan proceeds, a
repayment by petitioner in a year subsequent to the year in which
those proceeds were deposited into petitioners' accounts and for
which they constitute income to petitioners under the principles
of James v. United States, 366 U.S. 213 (1961), would not reduce
petitioners' income for the year during which those proceeds were
deposited. See Mais v. Commissioner, 51 T.C. 494, 499 (1968).
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