Thomas A. Johnson - Page 6

               The parties agree that during 1988 petitioner made deposits            
          to the Ticketline account of approximately $172,279.  Respondent,           
          using the bank deposits and cash expenditures method, determined            
          this amount to be unreported income.  Respondent concedes that              
          this figure should be reduced to $167,949.                                  
               In the notice of deficiency, respondent did not allow for              
          the cost of tickets sold, but respondent concedes that petitioner           
          must have had some cost of goods sold.  Respondent calculated               
          cost of goods sold of $70,635 and is willing to concede this                
          amount.  Respondent calculated this amount using the ratio of               
          cost of goods sold to gross receipts for the taxable year 1987 as           
          set forth in Johnson I.                                                     
               Where a taxpayer has failed to maintain adequate records of            
          the amount and source of his income, and the Commissioner has               
          determined that the deposits are income, the taxpayer must show             
          that the Commissioner's determination is incorrect.  Estate of              
          Mason v. Commissioner, 64 T.C. 651, 657 (1975), affd. 566 F.2d 2            
          (6th Cir. 1977).  In the absence of adequate books and records,             
          the Commissioner may reconstruct a taxpayer's income by any                 
          reasonable method of accounting which clearly reflects income.              
          Sec. 446; Holland v. United States, 348 U.S. 121, 130-132 (1954).           
          The bank deposits method has long been approved by the courts as            
          a method for computing income.  Estate of Mason v. Commissioner,            
          supra at 656.  Bank deposits are prima facie evidence of income.            

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