- 27 -
Commissioner, supra at 873-874, the record shows that respondent
investigated petitioner’s claims of nontaxable sources and showed
them to be implausible and/or not supported by objective evidence
in the record, United States v. Conaway, supra at 44; Parks v.
Commissioner, supra at 661. Respondent has thus established an
underpayment for 1987.
1988 and 1989
In contrast to the approach used for 1987, respondent
determined that petitioner underpaid his 1988 and 1989 taxes, not
on the basis of deposits into Pieces of Eight’s bank account, but
on the basis of expenditures from the account. Respondent does
not argue on brief that the method used to determine the
underpayments of tax for 1988 and 1989 was the bank deposit
method or any variation thereof. Respondent’s agent examined the
checks drawn on the account of Pieces of Eight and treated as
personal or nondeductible the expenditures that could not be
associated with that business. Respondent did not place in
evidence any analysis of bank deposits for Pieces of Eight during
those years, although respondent’s agent claimed to have gone
through its bank deposits. Respondent has offered no explanation
why the determination of the underpayment of tax apparently was
based on only an analysis of expenditures from Pieces of Eight’s
bank account, and not on deposits into the account.9
9
For instance, respondent does not claim that records of
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