Delwin D. Houser - Page 8




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          income determined under the bank deposits method of proof is                
          taxable to petitioner.                                                      
               In the related case of Adair v. Commissioner, T.C. Memo.               
          2000-110, docket Nos. 12103-97 and 20465-97, also filed this                
          date, we charge the Adairs with the other half of the income of             
          the roofing business relating to deposits into the checking                 
          account.                                                                    
               For each year in issue, our calculations of petitioner’s               
          taxable income are set forth below.  The bank deposits that are             
          identified as gross receipts of the roofing business are                    
          multiplied by the average net profit margin for roofing                     
          contractors, producing a partial taxable income figure for the              
          roofing business.  Added to this partial net income figure are              
          the unidentified bank deposits to calculate total taxable income            
          relating to the deposits to the checking account, one-half of               
          which is then charged to petitioner.                                        

        Bank Deposits                  Net Income                                     
        Identified as                  of Roofing                                     
        Gross Receipts    Average      Business on    Unidentified               One-half
        of Roofing     Net Profit    Identified         Bank       Taxable   Charged to
        Year      Business        Margin     Bank Deposits     Deposits     Income*   Petitioner
        1993      $490,009         20%         $ 98,002       $ 17,727     $115,875     $57,938
        1994       426,843         25%          106,711         51,061      157,939      78,970
        1995       197,965         18%           35,634        133,369      169,032      84,516
             *  As indicated, also included in the taxable income for each year is interest
             income relating to the checking account in the respective amounts of $146,
             $167, and $29.                                                           

               Under section 6651(f), an addition to tax of up to 75                  
          percent applies where the failure to file a Federal income tax              
          return is due to fraudulent conduct.  See DiLeo v. Commissioner,            





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