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$4,271.40, $4,672.80, $5,166 and $4,577.66 for 1984, 1985, 1986,
and 1987, respectively.
OPINION
I. Unreported Income
Gross income includes all income from whatever source
derived. Sec. 61(a). Every taxpayer is required to maintain
adequate records of taxable income. Sec. 6001. When a taxpayer
does not maintain adequate records, the Commissioner may
reconstruct income in accordance with a method that clearly
reflects the full amount of income received. Sec. 446(b);
Meneguzzo v. Commissioner, 43 T.C. 824, 831 (1965).
Because petitioner maintained inadequate records of his
income-producing activities, respondent used the net worth method
of income reconstruction to determine petitioner's taxable
income. Under this method, income is computed by determining a
taxpayer's net worth at the beginning and end of a taxable year.
The difference between the amounts is the increase in net worth.
An increase in a taxpayer's net worth, plus his nondeductible
expenditures, less nontaxable receipts, may be considered taxable
income. Holland v. United States, 348 U.S. 121, 125 (1954);
United States v. Giacalone, 574 F.2d 328, 330-331 (6th Cir.
1978).
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Last modified: May 25, 2011