Big Hong Ng - Page 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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