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For 1989 and 1990,1 total unexplained deposits, as
determined by respondent, made into the bank accounts the
partnership maintained for Stores 4 and 5 consist of the
following amounts:
Respondent's Determination of
Partnership Unexplained Bank Deposits
1989 1990 1991
$146,609 $266,352 0
For 1990, unexplained deposits, as determined by respondent,
made into the bank account petitioner maintained for Store 6
consist of $117,514.
Where a taxpayer fails to maintain adequate books and
records relating to taxable income, respondent may reconstruct a
taxpayer's income by any reasonable method. See sec. 446(b);
Edwards v. Commissioner, 680 F.2d 1268, 1270-1271 (9th Cir.
1982), affg. per curiam an Order of this Court; Parks v.
Commissioner, 94 T.C. 654, 658 (1990); United Dressed Beef Co. v.
Commissioner, 23 T.C. 879, 885 (1955).
The bank deposits method for computing income is approved by
the courts. See United States v. Soulard, 730 F.2d 1292, 1296
1 For 1991, total deposits made into the partnership Store 4
and Store 5 bank accounts were consistent with the total funds
from video rentals reported on the partnership’s 1991 information
Federal income tax return. Accordingly, in his bank deposits
analysis for the partnership for 1991, respondent made no
adjustments for unexplained bank deposits.
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