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OPINION
Section 61(a) defines gross income as "all income from
whatever source derived". Sec. 61(a)(1). This definition
includes all accessions to wealth that are clearly realized and
over which a taxpayer has complete dominion. Commissioner v.
Glenshaw Glass Co., 348 U.S. 426, 431 (1955).
The propriety of the bank deposits method of income
reconstruction is well established. Parks v. Commissioner, 94
T.C. 654, 658 (1990); Nicholas v. Commissioner, 70 T.C. 1057,
1064 (1978); Estate of Mason v. Commissioner, 64 T.C. 651,
656-657 (1975), affd. 566 F.2d 2 (6th Cir. 1977); Harper v.
Commissioner, 54 T.C. 1121, 1129 (1970). In general, bank
deposits are prima facie evidence of income, Marcello v.
Commissioner, 380 F.2d 494, 496-497 & n.4 (5th Cir. 1967);
Tokarski v. Commissioner, 87 T.C. 74, 77 (1986); Estate of Mason
v. Commissioner, supra, and the taxpayer must normally refute the
Commissioner's determination that such deposits stem from
unreported income. Rule 142(a); Welch v. Helvering, 290 U.S.
111, 115 (1933). However, when the Commissioner has the burden
of proof, bank deposits by themselves do not give rise to a
"logical presumption" that they are income. Armes v.
Commissioner, 448 F.2d 972, 974 (5th Cir. 1971), affg. in part
and remanding in part T.C. Memo. 1969-181. Under this
circumstance, the Commissioner may either connect the bank
deposits to a likely source of income or, where the taxpayer
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Last modified: May 25, 2011