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Issue 5. Petitioner's Unreported Income
Respondent determined that petitioner had unreported income
from the sale of aircraft and narcotics trafficking, and
unreported interest on that income.4
Respondent used the bank deposits method for the years 1978
through 1983 and then added certain additional cash or
unexplained expenditures. For the years 1985 through 1989,
respondent determined that petitioner had unreported interest
from BCCI in Panama and unreported gain in 1985 from the sale of
a Lear jet. For 1992, respondent determined that petitioner had
unreported income from NationsBank.
Every taxpayer is required to maintain adequate records of
taxable income. See sec. 6001. Petitioner did not maintain
adequate records from which the amount of his income or Federal
income tax liability could be computed. In the absence of such
records, a taxpayer's income may be reconstructed by any method
that, in the Commissioner's opinion, clearly reflects income.
See sec. 446(b); Parks v. Commissioner, 94 T.C. 654, 658 (1990).
The Commissioner's method need not be exact but must be
reasonable. See Holland v. United States, 348 U.S. 121 (1954).
The bank deposits method for computing unreported income has
long been sanctioned by the courts. See DiLeo v. Commissioner,
4Respondent addresses only petitioner's unreported interest
income on brief.
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