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7491, because petitioners failed to introduce credible evidence
of the nontaxable nature of the deposits and petitioners failed
to maintain adequate records to support their position. By using
the bank deposits method, respondent has made a prima facie case
that petitioners have received income. In any event, petitioners
have stipulated to the amount of the deposits made into the BMC
account and have offered no argument as to the nontaxable nature
of the amounts. Petitioners’ argument that BMC was not in
existence is irrelevant to this issue because petitioners
remained in control of the BMC account during 1996. We therefore
conclude that the $59,609.62 represents additional unreported
income to petitioners.
B. Unreported Self-Employment Income and Flowthrough
Income From NHIL
Respondent asserts that petitioners received $78,791.02 of
self-employment income based on unexplained bank deposits made
into the Nationwide account and the Cohen account. Respondent
also asserts that petitioners received flowthrough income from
NHIL of $210,549.91 based on unexplained deposits of $186,079.54
made into the NHIL account, the Green Tree income of $24,180, and
NHIL’s taxable income of $290.37 erroneously reported on
Form 1120. Petitioners have admitted receipt of the Green Tree
income and have not shown that the S corporation election made by
them for 1996 was not effective. We focus then on the treatment
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