- 7 - $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, thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011