Karan M. Hintze - Page 7

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          $30,614.62.  This figure is $13,437.62 more than that reported by           
          petitioner on her return.                                                   
               Petitioner objects to respondent’s reconstruction of her               
          gross income on the basis that respondent failed to account for             
          additional deposits of nontaxable income.  First, petitioner                
          contends that respondent failed to subtract from the total gross            
          receipts figure the proceeds of a $5,000 car loan, as well as an            
          additional $5,000 representing the proceeds of a loan from a                
          friend.  Respondent concedes that these amounts do not constitute           
          taxable income.  Nonetheless, respondent does not reduce gross              
          receipts by these amounts because the proceeds of the two loans             
          were initially deposited to savings account 355 (a fact confirmed           
          by the bank statements introduced into evidence by petitioner).             
          Since the beginning gross receipts figure included only deposits            
          to petitioner’s checking accounts, there is no reason to reduce             
          that figure on account of deposits of nontaxable income to                  
          petitioner’s savings accounts.  To the extent the loan proceeds             
          were transferred to petitioner’s checking accounts, they were               
          considered by respondent through the reduction for interaccount             
          transfers.  We agree with respondent that the gross receipts                
          figure which respondent determined should not be reduced by the             
          $10,000 in loan proceeds.                                                   
               Second, petitioner contends that the gross receipts figure             
          should be reduced by $3,002.07 on account of nontaxable gifts               

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