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respondent had knowledge. Petitioners imply that regardless of
whether or not petitioners' claims were substantiated, respondent
should have simply adjusted his bank deposits analysis by
petitioners' claim that the deposits were from loans,
inheritances, gifts, and previously taxed corporate income. We
do not agree.
Respondent's position was premised primarily on the bank
deposits method and petitioners' failure to substantiate items
that petitioners claimed as nontaxable deposits. It is well
established that unexplained bank deposits are presumptively from
taxable sources, see, e.g., Mallette Bros. Constr. Co. v. United
States, 695 F.2d 145, 148 (5th Cir. 1983); Price v. United
States, supra at 677; DiLeo v. Commissioner, 96 T.C. 858, 868
(1991), affd. 959 F.2d 16 (2d Cir. 1992), and that the taxpayer
bears the burden of proving that the Commissioner's determination
of income based on the bank deposits method is erroneous.
Clayton v. Commissioner, 102 T.C. 632, 645 (1994); DiLeo v.
Commissioner, supra at 868; see Calhoun v. United States, 591
F.2d 1243, 1245 (9th Cir. 1978) (taxpayer's burden to prove that
unexplained bank deposits came from a nontaxable source).
Thus, respondent was entitled to rely upon his bank deposits
analysis of petitioners' income in the absence of substantiation
regarding nontaxable sources of income. We do not regard the
information given to respondent's agents prior to the issuance of
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