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her gross income. Sec. 6001; DiLeo v. Commissioner, 96 T.C. 858,
867 (1991), affd. 959 F.2d 16 (2d Cir. 1992); sec. 1.6001-1(a),
Income Tax Regs. If the taxpayer fails to maintain or produce
adequate books and records, the Commissioner is authorized to
compute taxable income by any method that clearly reflects
income. Sec. 446(b); Holland v. United States, 348 U.S. 121
(1954). The Commissioner enjoys substantial latitude in
determining which method of computation to apply in order to
reconstruct the income of a taxpayer who fails to maintain or
produce records. Estate of Rau v. Commissioner, 301 F.2d 51, 54
(9th Cir. 1962), affg. T.C. Memo. 1959-117; Petzoldt v.
Commissioner, 92 T.C. at 693. The reconstruction of income need
only be reasonable in light of all the surrounding facts and
circumstances. Giddio v. Commissioner, 54 T.C. 1530, 1533
(1970).
This Court consistently has allowed the use of the bank
deposits method for reconstructing income. Clayton v.
Commissioner, 102 T.C. 632, 647 (1994); DiLeo v. Commissioner,
supra; Estate of Mason v. Commissioner, 64 T.C. 651 (1975), affd.
566 F.2d 2 (6th Cir. 1977). Once there is evidence of actual
receipt of funds by the taxpayer, then the taxpayer has the
burden of proving that all or part of those funds are not
taxable. Tokarski v. Commissioner, 87 T.C. 74 (1986).
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