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Every taxpayer is required to maintain adequate records of
taxable income. Sec. 6001. Petitioners did not maintain
adequate records from which the amount of their income or Federal
income tax liability could be computed. In the absence of such
records, the taxpayers' income may be reconstructed by any method
that, in the Commissioner's opinion, clearly reflects income.
Sec. 446(b); Parks v. Commissioner, 94 T.C. 654, 658 (1990). The
Commissioner's method need not be exact but must be reasonable.
Holland v. United States, 348 U.S. 121 (1954).
The bank deposit method for computing unreported income has
long been sanctioned by the courts. DiLeo v. Commissioner, 96
T.C. 858, 867 (1991), affd. 959 F.2d 16 (2d Cir. 1992). Though
not conclusive, bank deposits are prima facie evidence of income.
Estate of Mason v. Commissioner, 64 T.C. 651, 656-657 (1975),
affd. 566 F.2d 2 (6th Cir. 1977); see also Price v. United
States, 335 F.2d 671, 677 (5th Cir. 1964) (the bank deposit
method assumes that all money deposited in a taxpayer's bank
account during a given period constitutes gross income); Tokarski
v. Commissioner, 87 T.C. 74, 77 (1986); Jones v. Commissioner, 29
T.C. 601 (1957). Where the taxpayer has failed to maintain
adequate records as to the amount and source of his or her
income, and the Commissioner has determined that the deposits are
income, the taxpayer has the burden of showing that the
determination is incorrect. Rule 142(a); Clayton v.
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