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MR. COHEN: Not only that, but I’m saying that
some of the money that I started the business with, if
I started the business with x number of dollars, I’m
allowed to draw that x number of dollars out, without
it being income.
THE COURT: Well, that’s your version. You can
draw it out, but it’s subject to income tax. The
business has to pay--
* * * * * * *
THE COURT: I mean, you don’t just arbitrarily
draw money out of a business account and say, well,
this is equity, I don’t have to worry about the tax due
on it. You can’t--that’s just not the way things
operate.
Given this testimony, we have no basis on which to conclude
that the amounts treated as draws in respondent’s bank deposits
analysis represent deductible expenditures. Petitioner has not
so much as alleged any specific business expenses that were
omitted from respondent’s calculations. Hence, petitioner has
failed to prove his entitlement to any reduction in the net
business income determined by respondent on account of additional
costs incurred by Bicycle Sport.
We next turn to whether such net income should be decreased
to reflect nontaxable sources for the funds deposited in the
Bicycle Sport accounts. On several occasions during the
examination and at trial, petitioner alluded to potential
nontaxable sources in the form of inheritances, gifts, and loans
from family members and a friend, Anthony Turley. However, none
of these receipts have been substantiated. The minimal record
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