- 9 - 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 treatmentPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
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