- 7 - during the years in issue without any evidence of limitation on their use. We are not persuaded by petitioner’s belated attempts to disavow the lists of income items provided to respondent’s agent during the audit of petitioners’ returns for 1992 and 1993. Petitioners’ inability to prove their contentions is undoubtedly of their own making. Petitioners are required to maintain records from which their tax liability may be ascertained; in the absence of adequate books and records, respondent may use a reasonable method, such as a bank deposits analysis, to reconstruct petitioners’ income. See Estate of Mason v. Commissioner, 64 T.C. 651, 656, 658-659 (1975), affd. 566 F.2d 2 (6th Cir. 1977). Respondent did so in this case. Contrary to petitioners’ contention, respondent does not have to show that legal fees received during a taxable year were “earned” during the same year. See Miller v. Commissioner, T.C. Memo. 1989-128, affd. without published opinion 909 F.2d 509 (8th Cir. 1990). That burden is on petitioners, and they have failed to meet it. Section 7491(a), cited by petitioners, does not apply because the examination was begun in 1996, prior to the effective date of the burden of proof rule provided by the section. In any event, the provisions of section 7491(a) would not help petitioners’ case. See Higbee v. Commissioner, 116 T.C. __ (June 6, 2001).Page: Previous 1 2 3 4 5 6 7 8 Next
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