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Sport on October 18, 1989, at Monarch Bank. After a period of
inactivity, the Dana Niguel Bank account was closed on June 8,
1990, with a final withdrawal of $2,388.87. Using records for
these accounts, respondent determined petitioner’s net income
from Bicycle Sport as follows:
1988 1990 1992
Total Deposits $783,228.10 $741,074.36 $674,278.00
Less: Transfers 0.00 2,388.37 0.00
Subtotal 783,228.10 738,685.99 674,278.00
Less: Checks & Debits 777,215.48 760,520.95 679,358.26
Subtotal 6,012.62 -21,834.96 -5,080.26
Plus: Owner Draws 10,640.00 64,400.00 52,200.00
Subtotal 16,652.62 42,565.04 47,119.74
Plus: Additional Draws 0.00 8,500.00 0.00
Subtotal 16,652.62 51,065.04 47,119.74
Less: Gifts, Loans, Etc. 0.00 0.00 0.00
NET INCOME $16,652.62 $51,065.04 $47,119.74
We consider the sustainability of respondent’s analysis
first by addressing whether petitioner has shown entitlement to
further offsetting or deductible expenditures and, second, by
deciding whether petitioner has proven nontaxable sources for the
deposits in the Bicycle Sport accounts.
In performing the above calculations, respondent treated as
deductible business expenses all checks drawn on the Bicycle
Sport accounts except for those determined to be owner draws.
For the majority of these sums characterized as nondeductible
draws, the record contains copies of checks which are made
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