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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
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