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More importantly, respondent has shown that deposits were
made to petitioners' accounts, that all transfers between
accounts that were located or brought to respondent's attention
were subtracted from the total deposits, and that a further and
substantial reduction was made for petitioners' cost of goods
sold. Petitioners have not shown that any additional transfers
between accounts occurred, and/or that respondent's cost of goods
sold calculation should be increased. Moreover, petitioners have
not shown that any additional deposits, other than the ones
identified by respondent, were from nontaxable sources or that
the bank deposit analysis should be otherwise adjusted.
Instead, petitioners attempt a collateral attack, arguing
that a comparison of their living expenses for 1993 does not
comport with the amount of income reconstructed by respondent.
The living expense analysis that had been conducted by
respondent's agent was a litmus test to determine generally
whether petitioners were living within the means reported for the
taxable years. Respondent has not vouched for the accuracy or
completeness of that approach, and petitioners have not shown
how, in this setting, such an analysis would be more reliable
than the methodology used and relied upon in respondent's
determination. Petitioners have made their collateral claims
without offering detailed analysis to show what, if anything,
happened to the unexplained deposits. We find that petitioners'
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Last modified: May 25, 2011