- 15 -
shareholder loans made during the year and income reported by
JKY, less distributions made during the year.
Investment as of 12/31/90 $265,043.27
Increased by:
1991 Income 165,003.00
Loans to JKY 89,530.00
Decreased by:
1991 Distributions (134,105.00)
Investment as of 12/31/91 $385,471.27
Income Pass-Through--Form 1120S Adjustment
Respondent based the proposed adjustments to JKY's 1990 and
1991 income on the bank deposit method. Respondent conceded the
Form 1120S adjustment for taxable year 1990 in the amount of
$38,321 based upon information supplied by petitioners during the
preparation of this case for trial.
OPINION
Unreported Income
The first issue for resolution is whether petitioners
underreported their taxable income for each of the years in
issue. In this case, the evidence of unreported income consists
of respondent's net worth and bank deposit analyses. The
validity of those analyses must be examined by applying the
standards set forth in Holland v. United States, 348 U.S. 121
(1954). Under those standards, respondent must establish, with
reasonable certainty, an opening net worth; and she must
establish that either a likely source of unreported income
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011