- 33 -
F.2d 1383, 1385 (9th Cir. 1981), affg. per curiam T.C. Memo.
1979-3; Parks v. Commissioner, 94 T.C. 654, 658 (1990). One of
these methods, the bank deposits and cash expenditure method, has
long been sanctioned by the courts. Clayton v. Commissioner, 102
T.C. 632, 645 (1994); see, e.g., United States v. Soulard, 730
F.2d 1292 (9th Cir. 1984); United States v. Hall, 650 F.2d 994
(9th Cir. 1981).
Bank deposits are prima facie evidence of income, and the
Commissioner need not prove a likely source of that income.
Clayton v. Commissioner, supra at 645; Tokarski v. Commissioner,
87 T.C. 74, 77 (1986). The bank deposits method assumes that all
money deposited in a taxpayer's bank account during a given
period constitutes taxable income, but the Government must take
into account any nontaxable source or deductible expense of which
it has knowledge. Clayton v. Commissioner, supra at 646; DiLeo
v. Commissioner, 96 T.C. 858, 868 (1991), affd. 959 F.2d 16 (2d
Cir. 1992). The taxpayer has the burden of proving that the
deposits came from a nontaxable source. See Calhoun v. United
States, 591 F.2d 1243, 1245 (9th Cir. 1978); Ruark v.
Commissioner, 449 F.2d 311, 312 (9th Cir. 1971), affg. per curiam
T.C. Memo. 1969-48.
The Kudos
Unreported Income
In the notice of deficiency respondent determined that for
1990 the Kudos had unreported income as shown by unexplained bank
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