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deposits does not establish that the deposits were taxable. Reis
v. Commissioner, supra; Kavoosi v. Commissioner, T.C. Memo. 1986-
190; Easton v. Commissioner, a Memorandum Opinion of this Court
dated February 5, 1943; see also Hurley v. Commissioner, 22 T.C.
1256, 1264-1265 (1954), affd. 233 F.2d 177 (6th Cir. 1956).
We said above at par. A that respondent may use the net
worth method in this case. If we find that the net worth method
shows that petitioners omitted more than 25 percent from gross
income, then respondent has met the burden of proving that
section 6501(e)(1)(A) applies. See, e.g., Courtney v.
Commissioner, 28 T.C. 658, 668-669 (1957); Harris v.
Commissioner, T.C. Memo. 1977-222; Micciche v. Commissioner, T.C.
Memo. 1966-138; Bynum v. Commissioner, T.C. Memo. 1958-19; Smith
v. Commissioner, T.C. Memo. 1957-171; Boatsman v. Commissioner,
T.C. Memo. 1957-93; Estate of Williams v. Commissioner, T.C.
Memo. 1955-321. Respondent did so here. Petitioners reported
gross income of $48,893 for 1976 and $70,708 for 1977. Twenty
five percent of those amounts is $12,223 for 1976 and $17,677 for
1977. Petitioners failed to report more than these amounts for
1976 and 1977.
Petitioners argue that respondent may not establish that
they omitted 25 percent of their gross income by the net worth
method because it is arbitrary. Petitioners contend that
respondent omitted cash on hand and loans receivable, and did not
show that petitioners had a likely taxable source of income or
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