Sarkis N. and Baka S. Balabanian - Page 6

                                        - 6 -                                         
               Careswell performed the following steps in his bank deposits           
          analysis for petitioners' 1990 taxable year:  He calculated total           
          deposits of $4,898,961 from four different accounts, including              
          Colorado National Bank, Bank of Boulder, Santa Barbara Savings              
          and Loan, and Merrill Lynch.  From that amount he subtracted                
          nontaxable deposits of $1,148,549 and income reported by                    
          petitioners of $594,374, and he added cash and other income items           
          of $34,646, to arrive at unexplained deposits not reported of               
          $3,190,684.  Careswell then made a further reduction of                     
          $2,571,129, representing the transfers from petitioners to M&L,             
          thereby arriving at $619,555 of unreported income for 1990.                 
          Careswell did a similar analysis for 1989 and determined                    
          unreported income of $106,104.                                              
                                       OPINION                                        
               Respondent, by means of a bank deposits analysis,                      
          reconstructed petitioners' 1990 income.  Petitioners do not                 
          disagree with respondent's bank deposits mathematics.  Instead,             
          petitioners question respondent's use of the bank deposits                  
          analysis over the check spread analysis.  In addition,                      
          petitioners argue whether they should have to recognize the                 
          portions of the bank deposits attributable to the check exchange            
          scheme with M&L.  Petitioners assert that they were not entitled            
          to any portion of the income attributable to the check exchanges            
          until the resolution of the bankruptcy proceedings in 1993.                 
          Accordingly, we must consider whether respondent's use of the               




Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  Next

Last modified: May 25, 2011