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tools to determine unreported income by indirect methods of
proof. Id.; United States v. Hiett, 581 F.2d 1199, 1200 (5th
Cir. 1978). Petitioner asserts that, where the taxpayer's
records are adequate, respondent cannot rely on indirect methods
to reconstruct income. Leaving aside the question of whether
petitioner's records were in fact adequate in the instant case,
it is well settled that respondent's use of an indirect method of
determining income is not confined to situations where the
taxpayer has no books and records or where his books are
inadequate. See, e.g., Holland v. United States, 348 U.S. 121,
133 (1954); Davis v. Commissioner, 239 F.2d 187 (7th Cir. 1956),
affg. T.C. Memo. 1955-87; Goichman v. Commissioner, T.C. Memo.
1987-489; Estate of Hanna v. Commissioner, T.C. Memo. 1976-32.
In the instant case, respondent relies upon the bank
deposits and cash expenditures method to show an improper
omission of income. The propriety of the bank deposits and cash
expenditures method of income reconstruction is well established.
See, e.g., Caulfield v. Commissioner, 33 F.3d 991, 992 (8th Cir.
1994), affg. T.C. Memo. 1993-423; United States v. Abodeely,
supra at 1023; Parks v. Commissioner, 94 T.C. 654, 658 (1990).
The bank deposits and cash expenditures method is an
offshoot of the bank deposits method. The bank deposits and cash
expenditures method is used by respondent to prove the existence
of omitted or unreported income in circumstances where cash is
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