- 17 -
the taxpayer’s bank account. In Parks v. Commissioner, 94 T.C.
654, 658 (1990), we held:
Contrary to petitioner’s belief, the burden is
upon petitioner to prove that respondent's
determination of unreported income, computed using the
cash deposits and expenditures method of reconstructing
income, is incorrect. * * * [Citations omitted.]
Again, id. at 660, we held:
Where a taxpayer provides respondent with no leads as
to source, respondent is not required to negate every
possible source of nontaxable income, a matter
peculiarly within the knowledge of the taxpayer.
Moreover, where a taxpayer admits receipt of cash,
respondent need not prove a likely source of resulting
cash deposits or expenditures. [Citations omitted.]
Accord Hardy v. Commissioner, 181 F.3d 1002, 1004-1005 (9th Cir.
1999) (“If the Commissioner introduces some evidence that the
taxpayer received unreported income, the burden shifts to the
taxpayer to show by a preponderance of the evidence that the
deficiency was arbitrary or erroneous.”), affg. T.C. Memo.
1997-97; Clayton v. Commissioner, 102 T.C. 632 (1994); Kling v.
Commissioner, T.C. Memo. 2001-78 (“Absent some explanation, a
taxpayer's bank deposits represent taxable income. * * * The
taxpayer has the burden of proving that the bank deposits came
from a nontaxable source”); Beck v. Commissioner, T.C. Memo.
2001-270 (“Bank deposits are prima facie evidence of income”);
Kudo v. Commissioner, T.C. Memo. 1998-404 (Commissioner not
required to show link between deposits and taxable source of
income), affd. 11 Fed. Appx. 864 (9th Cir. 2001). These rules
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011