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States, 348 U.S. 121, 130-132 (1954); Parks v. Commissioner, 94
T.C. 654, 658 (1990).
One of these methods, whose propriety is well established,
is the bank deposits and cash expenditure method. Parks v.
Commissioner, supra; Nicholas v. Commissioner, 70 T.C. 1057, 1065
(1978). Under this method, respondent estimates the taxpayer's
cash expenditures and determines the amount of bank deposits for
the taxable years at issue in order to arrive at petitioner's
income, which is then compared with petitioner's reported income
to determine the amount of petitioner's unreported income. See
United States v. Abodeely, 801 F.2d 1020, 1023-1025 (8th Cir.
1986). The method is premised on the assumption that the
taxpayer has disposed of unreported income by depositing part of
it into bank accounts and by making cash expenditures of the
other part.
In the present case, petitioner did not keep adequate books
and records. Petitioner did not retain a bookkeeper or
accountant and did not keep formal books of account recording the
day-to-day receipt of income and payment of expenses of her
trucking business.8 Respondent, therefore, properly used the
8 Petitioner testified that she provided her return preparer
a handwritten list of the business expenses of her trucking
business. Petitioner also proffered into evidence copies of
receipts for the cash purchase of diesel fuel totaling $8,069,
and copies of truck repair and maintenance expense receipts
totaling $3,003. Respondent has conceded the deductibility of
all trucking business expenses claimed by petitioner, but treated
(continued...)
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