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showing linking the taxpayer to an income-producing activity
before the presumption in favor of respondent’s determination
attaches. Blohm v. Commissioner, 994 F.2d 1542, 1548-1549 (11th
Cir. 1993), affg. T.C. Memo. 1991-636. In the case at hand,
ample evidence supports respondent’s determinations.
Respondent used the cash expenditures method to reconstruct
petitioners’ income. This method is based on the assumption
that, absent some explanation by the taxpayer, the excess of a
taxpayer’s expenditures over reported income in a taxable year
constitutes taxable income. Petzoldt v. Commissioner, 92 T.C.
661, 695 (1989).
Petitioners have stipulated copies of bank records
disclosing deposits and disbursements from their bank accounts
and schedules prepared by respondent summarizing all of the
transactions, deposits, and disbursements. For each of the years
in issue, these documents show that petitioners made substantial
expenditures in excess of amounts reported as income on their
Federal income tax returns. Our review of the record indicates
that respondent complied with the requirements set forth in
Holland v. United States, 348 U.S. 121 (1954), by adequately
accounting for opening cash balances and for nontaxable receipts
such as loans, see Petzoldt v. Commissioner, supra at 695, and
that respondent has properly reconstructed petitioners’ income
for the years in issue.
Petitioners bear the burden of showing that respondent’s
application of the cash expenditures method was unfair or
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