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opinion 578 F.2d 1383 (8th Cir. 1978), including the
implausibility of petitioners’ explanations. See Bradford v.
Commissioner, 796 F.2d 303, 307 (9th Cir. 1986)(and cases cited
therein), affg. T.C. Memo. 1984-601; Boyett v. Commissioner, 204
F.2d 205, 208 (5th Cir. 1953), affg. a Memorandum Opinion of this
Court dated March 14, 1951.
A. Underpayment
Respondent used the bank deposits method to determine
Michael’s income for the years in issue. Supra note 8. It is
well settled that bank deposits are evidence of income where the
deposits were made by the party charged with the income or to an
account controlled by the party charged with the income.
Tokarski v. Commissioner, 87 T.C. 74, 77 (1986). The premise
underlying the bank deposits method of income reconstruction is
that, absent some explanation, a taxpayer’s bank deposits
represent income subject to income tax. DiLeo v. Commissioner,
96 T.C. at 868. The use of the bank deposits method of income
reconstruction has long been sanctioned by the courts. In using
this method, respondent must take into account any nontaxable
deposits or deductible expenses of which respondent has
knowledge. Id.
We have held that, where respondent has the burden of proof
in a bank deposits case, e.g., where respondent has determined
that a taxpayer has committed tax fraud, then--
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