Bruce A. and Kathy J. Krist - Page 12




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               As to the $19,640 of unexplained bank deposits raised by the           
          answer, respondent bears the burden of proof.  Rule 142(a).                 
          Section 61 provides that gross income means all income from                 
          whatever source derived.  Section 6001 imposes a duty on all                
          persons liable for any tax to maintain records.  It is well                 
          established that where a taxpayer fails to maintain adequate                
          records, the Commissioner may prove the existence and amount of             
          unreported income by any method that will clearly reflect the               
          taxpayer's income.  Sec. 446(b); Harper v. Commissioner, 54 T.C.            
          1121, 1129 (1970); Sindik v. Commissioner, T.C. Memo. 1996-47.              
               In this case petitioners' return did not clearly reflect the           
          activity in their bank accounts.  Respondent used a bank deposit            
          analysis to determine the amount of income.  Under the bank                 
          deposit analysis, the total of all the deposits is treated as               
          petitioners' income.  Sindik v. Commissioner, supra.  Adjustments           
          are then made to eliminate deposits that reflect nonincome items            
          such as gifts, loans, transfers between bank accounts, and                  
          redeposits.  Id.  Respondent determined that $65,090.01 was                 
          deposited in petitioner's three bank accounts.  Respondent                  
          alleged that petitioners accounted for $45,450 of the income on             
          their return.  The $45,450 consists of Mrs. Krist's wages, the              
          locksmith income, the rental income, and the limousine income.              
          Thus, respondent contends, a rounded amount of $19,640 remains to           
          be accounted for.                                                           








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