18
B. Deficiency
1. Respondent's Use of the Bank Deposits Method
We must decide whether, as respondent contends, petitioners had
unreported income in the amounts of $107,934 in 1990 and $249,479 in
1991. Respondent reconstructed petitioners' income using the bank
deposits method. Petitioners agree that they deposited $136,408 in
their bank accounts in 1990 and $396,905 in 1991.
If a taxpayer does not maintain adequate books and records,
respondent may reconstruct a taxpayer's income by any reasonable
method which clearly reflects income, sec. 446(b); Holland v.
United States, 348 U.S. 121, 130-132 (1954), including the bank
deposits method. Parks v. Commissioner, 94 T.C. 654, 658 (1990);
Estate of Mason v. Commissioner, 64 T.C. 651, 656 (1975), affd.
566 F.2d 2 (6th Cir. 1977). Bank deposits are prima facie
evidence of income. Tokarski v. Commissioner, 87 T.C. 74, 77
(1986); Estate of Mason v. Commissioner, supra at 656-657. Where
the taxpayer suggests a nontaxable source, the Commissioner must
either connect the bank deposits to a likely source of taxable
income or negate the nontaxable source alleged by the taxpayer.
Kramer v. Commissioner, 389 F.2d 236, 239 (7th Cir. 1968), affg.
T.C. Memo. 1966-234.
Respondent's determination is presumed to be correct, and
petitioners bear the burden of proving otherwise. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). Petitioners bear
the burden of proving that unexplained deposits are not taxable
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