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December 3, 1996; however, she did not produce a bank statement
from the account for the period December 4 through 31, 1996.
Because petitioner did not produce all of the requested records,
respondent reconstructed petitioner’s income by performing a bank
deposit analysis of her account. Respondent determined in the
notice of deficiency that petitioner had unexplained deposits in
the account and, therefore, unreported gross income of $35,318.
Subsequent to the issuance of the notice of deficiency respondent
reduced this amount to $25,578 calculated as follows:
Total deposits into account $99,381
Returned checks (3,375)
Deposits from home equity line of credit (13,000)
Income reported on return (57,428)
Total unexplained deposits 25,578
In addition to the use of the bank deposit methodology,
respondent determined that petitioner received $12,589.55 in
commission income and $1,800 in teaching income from O’Brien,
based upon Forms 1099-MISC issued to Sams, Inc. and filed with
respondent. Petitioner reported the teaching income of $1,800
but only $10,122 of the commission income in 1996.
Petitioner asserts that the deposits into the account can be
explained from the following sources:
Returned checks $3,375
Home equity line of credit 14,700
1099-MISC O’Brien commissions 10,122
1099-MISC O’Brien teaching 1,800
Mack/Middleton interest 22,140
Mack/Middleton reimbursement 3,881
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