20
F.2d 210, 212 (6th Cir. 1954), revg. and remanding a Memorandum
Opinion of this Court. Petitioner-husband's testimony was
plausible and, we believe, generally truthful.
3. Whether Respondent Investigated Leads
Petitioners argue that respondent did not investigate
relevant leads to their nontaxable sources of deposits. We
disagree. Petitioners first told Davis that they had a
substantial cash hoard in Brazil in March 1994. Respondent could
not independently verify how much money they had in Brazil.
Respondent determined that International was a likely source of
petitioners' deposits. Petitioners did not give respondent
International's books and records so respondent could not verify
the extent to which International was a likely source of income.
4. Whether Respondent Subtracted Nontaxable Sources of
Deposits in Reconstructing Petitioners' Income
Respondent contends that respondent properly reconstructed
petitioners' income for 1990 and 1991 using the bank deposits
method by subtracting from petitioners' income nontaxable sources
of deposits including transfers between bank accounts, expense
reimbursements, and offsetting wire transfers. As discussed
below, we conclude that respondent did not subtract all
nontaxable sources of deposits to petitioners' U.S. bank
accounts.
Respondent contends that petitioners have not proven that
their bank deposits in 1990 and 1991 were from cash that they had
at the end of 1989. Respondent contends that petitioners kept
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