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not show that respondent’s analysis of petitioner’s accounts for
rent and other income was in error.
On the basis of a bank deposits analysis for the 1993 tax
year (without the designation of any specific items of income),
respondent determined that petitioner had understated 1993 gross
receipts by $74,046. Likewise, for the 1994 tax year, respondent
used a generalized bank deposits analysis to conclude that
petitioner had overreported its income by $66,737. Petitioner
does not dispute the 1994 adjustment reducing its gross receipts.
With respect to respondent’s 1993 bank deposits analysis,
petitioner provided its own analysis in an attempt to show that
its gross receipts were overreported for its 1993 taxable year.
Petitioner’s analysis contained a reconciliation of its 1993
deposits to the income amount reported on its 1993 corporate
return. Petitioner’s reconciliation reflected reductions from
total deposits of amounts that were not includable in gross
receipts, such as proceeds of loans from Merrill Lynch and other
similar items. Respondent did not present any evidence regarding
the methodology used in conducting the 1993 bank deposits
analysis or contradicting the items petitioner explained were
from nontaxable sources.
Discussion
Taxpayers are required to maintain adequate records of
taxable income. See sec. 6001. During the examination of
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