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number of adjustments to respondent’s bank deposit analysis, and
the computations involve considerable detail. Nevertheless, the
facts in the record, most of which were stipulated, support
respondent’s final computations as adjusted. Indeed, on brief,
petitioners focus their factual dispute on only four specific
matters in the bank deposit analysis. We address each of the
specific factual matters that petitioners dispute.
A. Cash on Hand
Petitioners assert that respondent should reduce their 1988
unreported taxable income under the bank deposit analysis by
$35,000. According to petitioners, the adjustment is necessary
because they had $35,000 cash on hand at the beginning of the
year.
An adjustment to respondent’s bank deposit analysis would be
appropriate if petitioners had less than $35,000 at the end of
the year. If petitioners started with $35,000 cash at the
beginning of the year but had less than $35,000 at the end of the
year, then the difference could have been nontaxable source of
deposits to petitioners’ bank accounts or a nontaxable source of
cash expenditures by petitioners. However, Mr. Bacon testified
that he kept substantial amounts of cash on hand at all times
during the years in issue. Indeed, petitioners prepared a loan
application dated March 8, 1990, which reflected $35,000 cash on
hand. There is no credible evidence that petitioners’ cash on
hand was less than $35,000 at the end of any of the years in
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