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a large amount in his wallet and deposit some in the checking
account when it was needed to pay each month's bills.
During 1991, petitioner lived primarily on the cash hoard,
but he did receive some income from "side work" as a drywaller
and painter. In 1992, petitioner returned to his occupation of
installing dry wall.
Petitioners filed joint Federal income tax returns for the
years in issue. After petitioners' returns were audited for 1991
and 1992, but before their case was to be considered by the
Internal Revenue Service (IRS) Appeals Division, they filed
amended returns for those years. On their original 1991 return,
the only income petitioners reported was $12,500 of gambling
winnings from a bingo trip. On the amended 1991 return,
petitioners reported additional income of $83 in interest and
$1,000 in earnings from "side work". On their original 1992
return, petitioners reported wages of $9,367.30 and gambling
winnings of $1,250. On their amended 1992 return, petitioners
reported additional earnings of $3,377.
Issue 1. Unreported Income
Utilizing the bank deposit method of income reconstruction,
respondent determined that petitioners had unreported income of
$18,716 and $16,177 for 1991 and 1992, respectively. Petitioners
assert that these deposits constituted gifts, loans, and
reimbursements and are thus nontaxable.
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