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records or where their business records are inadequate, the
Courts have authorized the Commissioner to use the bank deposits
method to compute income. See Factor v. Commissioner, 281 F.2d
100, 116 (9th Cir. 1960), affg. T.C. Memo. 1958-94; DiLeo v.
Commissioner, 96 T.C. 858 (1991), affd. 959 F.2d 16 (2d Cir.
1992). Bank deposits are prima facie evidence of income. See
Tokarski v. Commissioner, 87 T.C. 74, 77 (1986). The burden,
generally, is on the taxpayers to show that the bank deposits are
derived from nontaxable sources. See Rule 142(a); Welch v.
Helvering, 290 U.S. 111 (1933); Reaves v. Commissioner, 31 T.C.
690, 718 (1958), affd. 295 F.2d 336 (5th Cir. 1961); Nicholson v.
Commissioner, T.C. Memo. 1993-183.
Petitioners admit that the amounts determined to be
unreported income in the notice of deficiency were deposited into
their banking accounts. However, petitioners contend that these
excess deposits represent inheritance and loan proceeds received
from various relatives which were deposited into the TBJ bank
account. Petitioners assert that they needed these funds to
cover expenses associated with the relocation of their store to a
larger retail space in 1992.
Petitioners assert that they received nontaxable funds from
the following sources and in the following years:
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