- 6 -
Based on the results of Agent Stacks' audit, respondent on
July 20, 1995, issued a notice of deficiency to petitioner.
Respondent subsequently conceded that Agent Stacks made an error
in the analysis relating to petitioner's 1989 tax year and now
contends that the correct amount of unreported income for 1989 is
$238,834.27 rather than the $386,663 earlier determined.
OPINION
Respondent's determinations are presumed to be correct, and
petitioner bears the burden of proving them erroneous. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); Mattingly
v. United States, 924 F.2d 785, 787 (8th Cir. 1991).
I. Unreported Income
Gross income includes all income from whatever source
derived. Sec. 61(a). If a taxpayer fails to maintain adequate
records of taxable income, the Commissioner may reconstruct
income in accordance with a method that clearly reflects the full
amount of income received. Sec. 446(b); Rowell v. Commissioner,
884 F.2d 1085, 1087 (8th Cir. 1989), affg. T.C. Memo. 1988-410;
Meneguzzo v. Commissioner, 43 T.C. 824, 831 (1965).
Respondent used the bank deposits method to reconstruct
petitioner's income for 1988 and 1989. Bank deposits are prima
facie evidence of income, Tokarski v. Commissioner, 87 T.C. 74,
77 (1986), and under the bank deposits method, all money
deposited into a taxpayer's bank account during a given period is
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011