- 8 -
Commissioner, 31 T.C. 1269, 1277 (1959), affd. in part and revd.
and remanded in part on another issue 283 F.2d 871 (6th Cir.
1960). Use of the source and application of funds method for
reconstructing income is well accepted. Taglianetti v. United
States, 398 F.2d 558, 562 (1st Cir. 1968); Cheesman v.
Commissioner, T.C. Memo. 1990-350; Jones v. Commissioner, T.C.
Memo. 1983-110. Under this method, any amount by which the
taxpayer’s applications of funds during the taxable year exceed
the funds available to him from known sources is attributed to
unreported taxable income. As long as respondent’s use of this
method to reconstruct the taxpayer’s income is reasonable under
the circumstances, respondent’s determination is entitled to a
presumption of correctness, and the taxpayer bears the burden of
proving a nontaxable source of the excess funds applied. Rule
142(a); Jones v. Commissioner, supra; cf. Cebollero v.
Commissioner, supra at 989-992; Estate of Mason v. Commissioner,
64 T.C. 651, 657-658 (1975), affd. 566 F.2d 2 (6th Cir. 1977).
Concessions by respondent regarding certain items in the
computation of the adjustments in the statutory notice ordinarily
do not shift the burden of proof to respondent. Mills v.
Commissioner, 399 F.2d 744, 749 (4th Cir. 1968), affg. T.C. Memo.
1967-67; Marcello v. Commissioner, 380 F.2d 494, 497 (5th Cir.
1967), affg. in part and revg. and remanding on other issues T.C.
Memo. 1964-302; Estate of Mason v. Commissioner, supra at 659.
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