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amount of his taxable income. Sec. 6001; sec.
1.6001-1(a) and (b), Income Tax Regs. If such records
are lacking, the Commissioner may reconstruct the
taxpayer's income by any indirect method that is
reasonable under the circumstances. Cebollero v.
Commissioner, 967 F.2d 986, 989 (4th Cir. 1992), affg.
T.C. Memo. 1990-618; Petzoldt v. Commissioner, 92 T.C.
661, 687 (1989); Schellenbarg v. Commissioner, 31 T.C.
1269, 1277 (1959), affd. in part and revd. and remanded
in part on another issue 283 F.2d 871 (6th Cir. 1960).
In order to prove that petitioner received income and did
not report it on his income tax returns, respondent called seven
witnesses: Barry Sharrow, Richard Eberli, Dexter Duncan, Dale
Rutz, Tim Earle, Gordon Anderson, and Gerald Latter. Each of
these witnesses credibly testified to purchasing computers or
computer parts from petitioner and to paying for them either with
cash or with checks not made payable to PAC. Those who paid by
check credibly testified that petitioner told them either to
leave the payee line blank or to enter petitioner’s name on the
payee line. Respondent established that the payments made by
these customers were not reported on petitioner’s or PAC’s income
tax returns.
Having established the existence of unreported income (and
the inaccuracy of petitioner’s books and records), respondent is
given substantial latitude in choosing an appropriate method to
reconstruct petitioner’s income. One reconstruction method we
have repeatedly accepted is the bank deposits method. As we
recognized in Zuckerman v. Commissioner, T.C. Memo. 1997-21:
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