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in part on another issue 283 F.2d 871 (6th Cir. 1960).
* * *
Respondent used the bank deposits method to reconstruct
petitioner’s income. As we recognized in Zuckerman v.
Commissioner, T.C. Memo. 1997-21:
Use of the bank deposits method for reconstructing
income is well established. DiLeo v. Commissioner, 96
T.C. 858, 867 (1991), affd. 959 F.2d 16 (2d Cir. 1992);
Estate of Mason v. Commissioner, 64 T.C. 651, 656
(1975), affd. 566 F.2d 2 (6th Cir. 1977). Under the
bank deposits method there is a rebuttable presumption
that all funds deposited to a taxpayer's bank account
constitute taxable income. Price v. United States, 335
F.2d 671, 677 (5th Cir. 1964); Hague Estate v.
Commissioner, 132 F.2d 775, 777-778 (2d Cir. 1943),
affg. 45 B.T.A. 104 (1941); DiLeo v. Commissioner,
supra at 868. The Commissioner must take into account
any nontaxable sources of deposits of which she is
aware in determining the portion of the deposits that
represent taxable income, but she is not required to
trace deposits to their source. Petzoldt v.
Commissioner, supra 695-696; Estate of Mason v.
Commissioner, supra at 657.
The bank deposits analysis was quite complex by reason of
the massive number of financial transfers petitioner made through
his web of trusts and accounts. Petitioner made many transfers
between accounts in his name, in the names of the eight trusts he
created, and in the name of his current spouse, Jeanee Girazian.
In order to avoid double counting income, it was necessary for
respondent to exclude transfers made between accounts.
Respondent introduced into evidence a detailed bank deposits
analysis itemizing the specific deposits that respondent treated
as constituting income to petitioner.
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