Michael and Kazuko Yang - Page 8




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               For the years 1995 and 1996, Mr. Yang personally prepared              
          petitioners’ Federal income tax returns.  On their 1995 return,             
          petitioners reported total gross income of $1,903 ($1,716                   
          interest and $187 capital gain).  On their 1996 return,                     
          petitioners reported total gross income of $3,660 ($2,872                   
          interest and $788 capital gain).  The returns listed Mr. Yang’s             
          occupation as unemployed, reported that petitioners had no                  
          interest in a foreign bank account, and reported no income from             
          Torrance Consulting, Summit Consulting, or Mr. Yang’s interest in           
          the family operated factory in Taiwan.  On March 19, 1999,                  
          respondent issued a notice of deficiency for the years 1995 and             
          1996.                                                                       
                                       OPINION                                        
               Respondent’s notice of deficiency determined unreported                
          income based on the bank deposits method of reconstructing                  
          income.  Respondent’s determination is entitled to the                      
          presumption of correctness, and petitioners bear the burden of              
          proving that such determination is incorrect.  See Rule 142(a);             
          Tokarski v. Commissioner, 87 T.C. 74, 76-77 (1986); Estate of               
          Mason v. Commissioner, 64 T.C. 651, 657 (1975), affd. 566 F.2d 2            
          (6th Cir. 1977).                                                            
               Petitioners claim that the amounts deposited to their bank             
          accounts were nontaxable gifts from Mr. Yang’s father.                      








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