Marcel Toto Ngosso - Page 8




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          $104,239 in 1996.  From the unexplained bank deposits respondent            
          deducted the following amounts that were not includable in                  
          petitioner’s income:                                                        
               Unexplained bank deposits               $104,239                       
               Income tax refund checks      $21,726                                  
               1997 receipts                 2,000                                    
               Examiner error                1,624                                    
               Currency transactions         39,445                                   
               Total                                   64,795                         
               Underreported income                    39,444                         
               Petitioner’s position is that the currency exchanges are               
          “net transactions” and that the money he received is not income             
          to him because he acted as a conduit for Mr. Emmanuel.                      
               Gross income means all income from whatever source derived.            
          Sec. 61.  When a taxpayer fails to provide adequate records                 
          substantiating income, the Commissioner is authorized to                    
          reconstruct the taxpayer’s income by using any reasonable method            
          that clearly reflects income, including an indirect method.  Sec.           
          446(b); Holland v. United States, 348 U.S. 121 (1954).  The                 
          reconstruction need only be reasonable in light of all facts and            
          circumstances.  Clayton v. Commissioner, 102 T.C. 632, 643                  
          (1994); Giddio v. Commissioner, 54 T.C. 1530, 1532 (1970).                  
               The Commissioner is authorized to use bank deposit records             
          to reconstruct a taxpayer’s income.  Clayton v. Commissioner,               
          supra at 645 (citing DiLeo v. Commissioner, 96 T.C. 858, 867                
          (1991), affd. 959 F.2d 16 (2d Cir. 1992)).  When a taxpayer keeps           
          no books or records and has large bank deposits, the                        






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