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determined in the notice of deficiency--resulting in an increase
of $2,970 to unreported income. Second, respondent's counsel
determined that petitioners' bank deposits during 1992 totaled
$44,766, as opposed to $42,964 as determined in the notice of
deficiency--resulting in an increase of $1,802 to unreported
income.
OPINION
Issue (1) Unreported Income
A. General Principles of Law
Because the parties have agreed as to the amount of Mrs.
Margolis' unreported self-employment income, we must only decide
whether petitioners received additional unreported income as
determined by respondent's bank deposits analysis. In deciding
the issue, we keep in mind that at trial respondent asserted an
increased deficiency, claiming the amount of the additional
unreported income to be $16,727, as opposed to $11,955 as
determined in the notice of deficiency.
We begin by referring to two principles of law.
First, it is well established that bank deposits are prima
facie evidence of income, Mills v. Commissioner, 399 F.2d 744,
748 (4th Cir. 1968), affg. T.C. Memo. 1967-67; Tokarski v.
Commissioner, 87 T.C. 74, 77 (1986); Estate of Mason v.
Commissioner, 64 T.C. 651, 656-657 (1975), affd. 566 F.2d 2 (6th
Cir. 1977), 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.
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