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of the unexplained deposits into all three of the accounts
totaling $264,870.56.
The burden of proof with respect to the unreported income
still in dispute is on respondent because he asserted the
increased deficiencies in his amendment to answer. Rule 142(a).
Because petitioners failed to maintain adequate records of their
business activities for 1996, the IRS secured petitioners’
records to determine income under the bank deposits method.
Based on the bank records for the Nationwide account, the Cohen
account, and the NHIL account and on the stipulated facts
concerning deposits into those accounts, respondent determined
that petitioners had unreported income. Respondent has met his
burden, and petitioners must show that the deposits arose from
nontaxable sources.
Petitioners dispute respondent’s computation by combining
all of the unreported income into a total of $289,341, including
the deposits, the Green Tree income, and NHIL’s income. Of this
amount, petitioners “admit to unreported income of $121,722.45”
and dispute only $167,618.55.
Petitioners assert that $47,618.55 represents “gross
proceeds from the sale of capital assets which were deposited
into various accounts under the control of the Petitioners.”
Petitioners raised this argument in their reply brief.
Although petitioners’ argument is somewhat unintelligible, they
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