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hypothetical drug-dealing income where the Commissioner offered
no proof either of income or of drug dealing. However, if the
Commissioner either establishes the identity of the specific
income or proves the source of unreported income, the taxpayer
has the burden of proving the Commissioner’s determination
incorrect. See, e.g., Hardy v. Commissioner, supra at 1004-1005
(showing of unexplained bank deposits sufficient to shift burden
to taxpayer); Palmer v. United States, 116 F.3d 1309 (9th Cir.
1997) (showing that expenditures exceeded reported income
sufficient to shift burden); Roat v. Commissioner, 847 F.2d 1379
(9th Cir. 1988) (presumption of correctness applies where
taxpayer admitted receiving income); Delaney v. Commissioner, 743
F.2d 670 (9th Cir. 1984) (presumption of correctness applies
against taxpayer who admits owning asset allegedly purchased with
unreported income), affg. T.C. Memo. 1982-666; United States v.
Stonehill, 702 F.2d 1288 (9th Cir. 1983).
In the case at hand, respondent has shown through
petitioner’s bank records both the receipt of specific items of
unreported income (the bank deposits) and their likely source
(receipts from sales and repairs of computer equipment).13 In
13As explained supra p. 12, responses to Agent Bricker’s
mailing showed that petitioner received additional unreported
income of $74,470.52 from cash sales during the years in issue.
Respondent did not attempt to use statistical methods to estimate
the amount of unreported cash sales that petitioner received from
sources who did not respond to Agent Bricker’s mailing. For a
(continued...)
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