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recognize that the taxpayer is responsible for maintaining
adequate books and records to explain the sources of his bank
deposits.
If the taxpayer offers a possible nontaxable source for the
deposits, the Commissioner must either negate the potential
nontaxable source or connect the deposits with a likely source of
taxable income. Kramer v. Commissioner, 389 F. 2d 236, 239 (7th
Cir. 1968) (Commissioner not required to provide likely source if
he proves that deposit was not from “cash hoard”), affg. T.C.
Memo. 1966-234; Price v. Commissioner, T.C. Memo. 2001-307 (“If
the taxpayer suggests a nontaxable source, the Commissioner must
either connect the bank deposits to a likely source of taxable
income or negate the nontaxable source alleged by the
taxpayer.”); Estate of Johnson v. Commissioner, T.C. Memo.
2001-182.
In cases such as the case at hand, governed by precedent
from the Court of Appeals for the Ninth Circuit, if the
Commissioner fails to prove that the taxpayer actually received
income (such as, in the case at hand, by showing unexplained bank
deposits), the Commissioner has the burden of proving a likely
source of the allegedly unreported and reconstructed income. In
Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir. 1979), revg.
67 T.C. 672 (1977), the Court of Appeals ruled that no
presumption of correctness would attach to a reconstruction of
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