Karen Ann Keegan - Page 8

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                  can show his expenditures were made from some                                       
                  nontaxable source of funds. * * *                                                   
            A deficiency based upon the source and application of funds                               
            method is presumptively correct, and the burden of proof is on                            
            the taxpayer to prove otherwise.  Rule 142(a).  A taxpayer may                            
            meet this burden by proving that assets were on hand at the                               
            beginning of the taxable period with which to make the                                    
            expenditures, that amounts received during the year were                                  
            nontaxable, or that someone else made the expenditures.  Id. at                           
                  In this instance, respondent used the average living                                
            expenses of one person, as provided by the Bureau of Labor                                
            Statistics (BLS), as a basis for determining that petitioner's                            
            income for the taxable year 1994 included the cost of supporting                          
            herself.  See Denson v. Commissioner, T.C. Memo. 1982-360                                 
            (discussing the Commissioner's reliance on BLS tables).  We have                          
            previously approved the Commissioner's use of BLS data when                               
            reconstructing a taxpayer's income.  See Giddio v. Commissioner,                          
            54 T.C. 1530, 1533 (1970).  Nevertheless, if evidence exists                              
            which indicates that a taxpayer's living expenses for the taxable                         
            year in question were less than the average living expenses                               
            provided in the BLS tables, we may modify the Commissioner's                              
            reconstruction under the source and application of funds method                           
            to account for that difference.  Denson v. Commissioner, supra.                           

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