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pursuant to section 7206(2), of aiding and assisting in the
preparation of false 1990 through 1994 corporate returns, and Dr.
Zamzam was indicted and convicted, pursuant to section 7206(1),
of signing the false 1991, 1992, and 1994 corporate returns.
Petitioners appealed their convictions. Dr. Zamzam’s convictions
were upheld by the Court of Appeals for the Fourth Circuit on
June 4, 1999, and Mrs. Zamzam’s appeal was dismissed by the
Fourth Circuit Court of Appeals on July 29, 1999.
OPINION
I. Unreported Income
Respondent determined that the Zamzams and ZMDI had
unreported income attributable to the Zamzams’ diversion, during
the years in issue, of corporate receipts to their personal use.
Respondent also determined that the Zamzams had not reported all
of their wage income in 1991.
Gross income includes all income from whatever source
derived. See sec. 61(a). Every taxpayer is required to maintain
adequate records of taxable income. See sec. 6001. If a
taxpayer fails to maintain such records, respondent may
reconstruct income in accordance with a method that clearly
reflects the full amount of income received. See sec. 446(b);
Meneguzzo v. Commissioner, 43 T.C. 824, 831 (1965). Respondent
used the bank deposits method to reconstruct petitioners’ income
for the years in issue. Petitioners have the burden of proving
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