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petitioners introduced credible evidence that the cash
transaction was a loan. Section 7491 applies only to court
proceedings arising in connection with examinations commencing
after July 22, 1998 and thus does not apply to this case.
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3001(c), 112 Stat. 726, 727. In any event,
as set forth below, we do not accept petitioner’s testimony as
credible. Petitioners further argue that respondent must put
forth evidence that the cash transaction was not a loan and must
show some link between the transaction and petitioner’s business.
A bank deposit is prima facie evidence of income. Tokarski
v. Commissioner, 87 T.C. 74, 77 (1986); see Clayton v.
Commissioner, supra at 645; DiLeo v. Commissioner, 96 T.C. 858,
868 (1991), affd. 959 F.2d 16 (2d Cir. 1992). The bank deposits
method of reconstruction assumes that all money deposited to a
taxpayer’s account is taxable income, unless the taxpayer can
show a nontaxable source for the income. See DiLeo v.
Commissioner, supra at 868. Respondent need not show a likely
source of the income. Tokarski v. Commissioner, supra at 77.
Here, there is no requirement that respondent produce
evidence linking petitioners to an income-producing activity
because, as in Tokarski v. Commissioner, supra at 76, there is no
question that petitioners actually received the money. Although
petitioners applied part of the funds to the purchase of the
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