- 18 - Once the Commissioner makes a prima facie case of unreported income using the bank deposits method and has made a determination in the notice of deficiency, the taxpayer bears the burden of proving that the deposits identified by the Commissioner as unreported income do not, in fact, represent unreported income. Hardy v. Commissioner, 181 F.3d 1002, 1004- 1005 (9th Cir. 1999) (if the Commissioner introduces some evidence that the taxpayer received unreported income, the burden shifts to the taxpayer to show by a preponderance of the evidence that the deficiency was arbitrary or erroneous), affg. T.C. Memo. 1997-97; Clayton v. Commissioner, 102 T.C. 632 (1994); DiLeo v. Commissioner, 96 T.C. 858, 869 (1991) (“petitioners, not the Government, bear the burden of proving that respondent’s determination of underreported income, computed using the bank deposits method of reconstructing income, is incorrect”), affd. 959 F.2d 16 (2d Cir. 1992); Beck v. Commissioner, T.C. Memo. 2001-270 (“Bank deposits are prima facie evidence of income.”);4 4Petitioner moved at trial that respondent should bear the burden of proof under sec. 7491(a), under which the burden of proof is placed on respondent as to any factual issue for which petitioner offers credible evidence that is relevant to his liability for the income tax deficiencies if certain conditions have been satisfied. According to the legislative history of sec. 7491: “The taxpayer has the burden of proving that it meets each of these conditions, because they are necessary prerequisites to establishing that the burden of proof is on the Secretary.” S. Rept. 105-174, at 45 (1998), 1998-3 C.B. 537, 581. Among other conditions, petitioner must show that he “has maintained all records required under this title and has (continued...)Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Next
Last modified: May 25, 2011