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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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