-9-
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). In a cash
expenditures analysis, the amount by which a taxpayer's cash
expenditures exceeds his known sources of income is assumed to be
taxable income, unless the taxpayer can show the expenditures were
made from a nontaxable source. DeVenney v. Commissioner, 85 T.C.
927, 930 (1985).
In analyzing the bank deposits, the revenue agent separated
cash, checks, cashier's checks, and wire transfers. She examined
the source of each deposit. She separated those items subject to
self-employment tax, such as presumed receipts from the
restaurants, from those items not subject to self-employment tax,
such as rental income. These appeared as separate adjustments in
the notice of deficiency with respect to Ms. Ng.
To the extent possible the revenue agent eliminated those
items that had been reported or came from nontaxable sources, such
as transfers and refinancing proceeds. The revenue agent also
subtracted from unidentified cash deposits the maximum amount of
reported rents that could have been paid in cash or by check;
moreover, she subtracted substantiated partnership draws paid
directly to Ms. Ng by Golden Dragon Restaurant. We are satisfied
that the revenue agent gave Ms. Ng credit for every nontaxable
source of income that could be identified. Moreover, before the
trial, respondent conceded certain nontaxable items that became
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