William B. and Donna McDermott - Page 6

                                         -6-                                          
          applied towards petitioners’ daughter’s college tuition for the             
          fall semester.                                                              
                                       OPINION                                        
               Respondent argues that his use of the bank deposits method             
          is a “prima facie case” that requires that petitioners prove that           
          the six deposits are not unreported income.  Respondent asserts             
          that the revenue agent who conducted the audit “determined based            
          on his experience that petitioners’ income in 1995 was diverted             
          to an offshore bank account and that the funds were moved to the            
          McDermott’s [sic] parents’ account in Canada and then came back             
          as alleged gifts.”  Respondent asserts that the funds given to              
          petitioners by Ms. McDermott’s mother also were determined to be            
          unreported income because of the involvement of Mr. McDermott’s             
          father with offshore accounts.                                              
               Petitioners argue that each of the six deposits has a                  
          nontaxable source.  Petitioners assert that the $3,165 deposit              
          was a payment to Mr. McDermott from Omega (consisting of $165 for           
          a petty cash expense, $1,000 as partial reimbursement for                   
          out-of-pocket expenses, and $2,000 as an advance contract payment           
          that Mr. McDermott included in the $12,000 that he recognized as            
          income for 1995).  They assert that the first $3,000 deposit was            
          wired to them from Ms. McDermott’s mother as a Christmas gift.              
          They assert that the other two $3,000 deposits were given to them           
          by Mr. McDermott’s father to pay for his extended stay at their             






Page:  Previous  1  2  3  4  5  6  7  Next

Last modified: May 25, 2011