Katrina L. Price - Page 9




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          $1,000 or more as income.  Petitioner did not have adequate books           
          and records.  If a taxpayer does not maintain adequate books and            
          records, the Commissioner may reconstruct a taxpayer's income by            
          any reasonable method which clearly reflects income, sec. 446(b);           
          Holland v. United States, 348 U.S. 121, 130-132 (1954), including           
          the bank deposits method, Parks v. Commissioner, 94 T.C. 654, 658           
          (1990); Estate of Mason v. Commissioner, 64 T.C. 651, 656 (1975),           
          affd. 566 F.2d 2 (6th Cir. 1977).  Bank deposits are prima facie            
          evidence of income.  Clayton v. Commissioner, 102 T.C. 632, 645             
          (1994); Tokarski v. Commissioner, 87 T.C. 74, 77 (1986); Estate             
          of Mason v. Commissioner, supra.  If the taxpayer suggests a                
          nontaxable source, the Commissioner must either connect the bank            
          deposits to a likely source of taxable income or negate the                 
          nontaxable source alleged by the taxpayer.  Kramer v.                       
          Commissioner, 389 F.2d 236, 239 (7th Cir. 1968), affg. T.C. Memo.           
          1966-234.  Respondent has connected the bank deposits to a likely           
          source of taxable income because petitioner admits that she                 
          deposited gambling winnings in her bank accounts.  We conclude              
          that respondent properly reconstructed petitioner’s additional              
          income for 1993 and 1994 using the modified bank deposits method.           
          Thus, petitioner bears the burden of proving that the deposits              
          were not taxable income to her but were instead derived from a              
          nontaxable source.  Welch v. Commissioner, 204 F.3d 1228, 1230              
          (9th Cir. 2000), affg. T.C. Memo. 1998-121; Calhoun v. United               






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