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numerous bank deposits and cash expenditures from unexplained
sources. The bank deposits plus cash expenditures method is a
recognized method of recomputing income. See Parks v.
Commissioner, supra; Nicholas v. Commissioner, 70 T.C. 1057,
1065 (1978). Petitioners bear the burden of showing that
respondent’s determinations based on his application of the bank
deposits plus cash expenditures method of reconstructing income
are erroneous.2 See Rule 142(a); Parks v. Commissioner, supra
at 658; Nicholas v. Commissioner, supra at 1064.
Petitioners have alleged, and we have discovered, no
infirmity in respondent’s reconstruction of their income using
the bank deposits plus cash expenditures method. Petitioners
produced no credible evidence of any nontaxable sources for the
unexplained funds deposited into their banking accounts or the
2 The Internal Revenue Service Restructuring & Reform Act of
1998 (RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726,
added sec. 7491, which shifts the burden of proof to the
Commissioner in certain circumstances. Sec. 7491 is applicable
to court proceedings arising in connection with examinations
commencing after July 22, 1998. See RRA 1998 sec. 3001(c).
Because respondent’s examination of petitioners commenced before
July 23, 1998, sec. 7491 is inapplicable here.
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