- 14 - income tax liability can be assessed, respondent may reconstruct the taxpayer's income by using any method that, in the opinion of respondent, clearly reflects income. Sec. 446(b); Moore v. Commissioner, 722 F.2d 193 (5th Cir. 1984), affg. T.C. Memo. 1983-20. The source and application of funds method of determining a taxpayer's gross income is well accepted. United States v. Johnson, 319 U.S. 503, 517 (1943); Meier v. Commissioner, 91 T.C. 273, 295-296 (1988). In this case, the evidence of unreported income originated from respondent's source and application analysis. The parties stipulated to a source and application of funds analysis that "correctly reflects petitioner's understatement of gross income for the taxable year 1990, except that petitioner contends that loans in the amount of $867,738.00 from a Mexican corporation should be included as a source of funds, and that the source of the $248,229.00 Alamo Title item was a loan from Mexico". The parties also stipulated to a source and application of funds analysis that "correctly reflects petitioner's gross income for the taxable year 1991," except that petitioner contends that loans made to Interservice Corporation should not be included as an application of funds. For 1990, the stipulated analysis includes an "understatement before disputed item" in the amount of $941,671 and an "understatement after disputed items" as ($174,296). For 1991, the "understatement after disputed item" is shown as $25,454. Petitioner has thus stipulated thatPage: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Next
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