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Commissioner must take into account any nontaxable sources of
deposits of which she is aware in determining the portion of the
deposits that represent taxable income, but she is not required
to trace deposits to their source. Petzoldt v. Commissioner,
supra 695-696; Estate of Mason v. Commissioner, supra at 657.
Petitioner argues that respondent could not properly
conclude that deposits to his bank accounts during 1987
represented taxable income without verifying the sources of the
deposits. Petitioner suggests that if the revenue agent had
obtained petitioner's canceled checks from the banks, the
information they provided as to the purposes for petitioners'
withdrawals might have indicated nontaxable loan proceeds or loan
repayments as the source of some deposits. To the extent that
petitioner bears the burden of proof, respondent was fully
justified in assuming that the sources of unexplained deposits
were taxable income. If respondent did not identify the sources
of funds, it was because petitioner failed to provide
documentation requested by the revenue agent and would not
consent to extend the limitations period for assessment to enable
the agent to continue his investigation and analysis. Petitioner
did not advise respondent during the audit or pretrial discovery
phases of the case that he had received any nontaxable funds, and
the Court's order of November 4, 1994, barred petitioner from
offering any evidence thereof at trial. Respondent's
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