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In January 1993, petitioner's friend, Vilma Reye, lent her
$500. In April 1993, Petitioner repaid the loan in its entirety.
OPINION
A. Respondent's Reconstruction of Income
Section 6001 requires all taxpayers to maintain adequate
books and records of taxable income. In the absence of adequate
books and records, the Commissioner is authorized to reconstruct
the taxpayer's income by any reasonable method that clearly
reflects the taxpayer's income. Sec. 446(b); Holland v. United
7(...continued)
Initial unreported income in the $26,987
statutory notice
Cash expenditure increase for additional +14,484
Schedule C deductions allowed
Decrease in bank deposits for interbank -22,500
transfers
Increase in cash expenditures resulting +22,500
from decrease in total checks disbursed
Decrease in cash expenditures resulting -1,975
from decrease in total expenditures
relating to overstatement of payment at
closing of the house in the statutory
notice
Decrease in cash expenditures relating -6,166
to Schedule E expenses disallowed
Adjustment for $3,841 error in -7,682
Ms. Dickerson's report. Instead of being
a cash outlay, such amount represents an
excess of total checks disbursed over total
expenditures
Revised unreported income 25,648
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Last modified: May 25, 2011