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bank deposits analysis prepared by their accountant showing that
RAJ's 1991 and 1992 returns reflected substantially higher gross
receipts than amounts deposited into RAJ's corporate accounts.
Petitioners asserted that a large portion of the deposits to
their personal accounts represented previously reported amounts
on the returns of RAJ. Apart from the bank deposits analysis
prepared by their accountant, petitioners did not provide any
substantiation for their claim that a portion of the deposits
constituted a distribution with respect to petitioners' stock.
The Appeals officer rejected petitioners' assertions
regarding the corporate source of deposits based on the following
grounds: First, RAJ's corporate books and records were
inadequate to establish the corporate gross receipts. Second,
petitioners did not produce the original bank statements on which
they relied but rather simply produced a summary statement
prepared by their accountant. Third, contrary to petitioners'
claim that a portion of the deposits represented distributions
with respect to their stock, the 1991 and 1992 returns filed by
RAJ showed no distributions to petitioners. Finally, given the
inadequacy of RAJ's records concerning the cost of goods sold,
there was no evidence that even if a portion of the deposits did
represent gross receipts reported by RAJ, such deposits did not
in fact represent taxable income to petitioners (for lack of
basis in corporate stock). Respondent's Appeals officer
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Last modified: May 25, 2011