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unexplained based upon the record and concessions made by
respondent. Tables 4, 9, and 14 summarize the unexplained
deposits and expenditures for the 3 years.
Issue 1. Deficiencies in 1985, 1986, and 1987
Section 61 provides the general rule that gross income
includes income from whatever source derived. To facilitate
calculating that income, section 6001, as interpreted by section
1.6001-1(b), Income Tax Regs., requires taxpayers "to keep such
records as will enable the district director to determine the
correct amount". In the absence of such records, respondent may
use indirect methods of proof of income such as the bank deposits
method. DiLeo v. Commissioner, 96 T.C. 858, 867 (1991), affd.
959 F.2d 16 (2d Cir. 1992); Petzoldt v. Commissioner, 92 T.C.
661, 687 (1989); Estate of Mason v. Commissioner, 64 T.C. 651,
657 (1975), affd. 566 F.2d 2 (6th Cir. 1977); Estate of Hague v.
Commissioner, 45 B.T.A. 104 (1941), affd. 132 F.2d 775 (2d Cir.
1943), affd. sub nom. Commissioner v. Uniacke, 132 F.2d 781 (2d
Cir. 1942). Respondent's determinations are entitled to a
presumption of correctness, and petitioner bears the burden of
proof to rebut that presumption by a preponderance of the
evidence. Rule 142(a); Welch v. Helvering, 290 U.S. 111 (1933);
see also Reid v. Commissioner, T.C. Memo. 1974-185, affd. without
published opinion 516 F.2d 896 (2d Cir. 1975) (using the bank
deposits method, deducting identifiable items, and regarding the
rest as unexplained deposits and thus taxable income, puts the
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