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1987 Puerto Rican tax return and a certificate of nonfiling for
petitioners for 1988 through 1994. Petitioners do not recall
having filed tax returns in Puerto Rico after 1988.
Petitioners reported adjusted gross income of $32,041 on
their 1990 Federal income tax return. That return did not report
a capital loss, and petitioners did not make an election to carry
forward a net operating loss.
Respondent's Determination of Unreported Income
In the audit of the income tax returns, the revenue agent
deemed petitioners' records to be inadequate. Consequently, he
computed their taxable income for 1991 and 1992 by using a bank
deposits analysis. He took the total deposits from the personal
and business bank accounts and combined them. He then subtracted
amounts to account for interbank transfers, gifts, loans,
redeposits, and other nontaxable items to determine unreported
income. The revenue agent who performed the bank deposits
analysis requested an extension of time to complete it but the
extension was not granted by petitioners. At trial the agent
stated that he thought the determination was, in his best
estimate, correct.
In the notice of deficiency, respondent determined
unreported income by the bank deposit analysis as follows:
Bank Deposit Analysis 1991 1992
Deposits to Business Account--Osceola $1,536,251 $3,598,451
Deposits to Personal Account--Barnett 67,066 52,403
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