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and (B) to substantiate items, maintain required records, and
fully cooperate with respondent’s reasonable requests.
Therefore, the burden of proof remains with petitioner. Further,
based on our findings and conclusion, the burden of proof does
not play a role with respect to the accuracy-related penalty
under section 6662.
Respondent utilized the bank deposits method to reconstruct
petitioner’s income because petitioner did not present any books
and records reflecting the income reported on his return. We
accept petitioner’s and the witnesses’ generalized testimony that
petitioner engaged in some currency exchange transactions, and
that a certain amount of the bank deposits is not income to
petitioner. However, the documents and testimony are not
necessarily consistent with the amounts reported on the return,
and petitioner did not explain the flow of cash into and out of
his bank accounts. Petitioner acknowledged at trial that he
failed to retain records of the currency exchange transactions.
As indicated above, respondent took into account $21,726 of
income tax refund checks issued to third parties and cashed by
petitioner on their behalf, and $39,445 of currency exchange
transactions with Mr. Emmanuel as nontaxable sources of income.
Under these facts, we conclude that respondent’s
reconstruction of petitioner’s income was reasonable. We are
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