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the Commissioner may use an indirect method of proving income,
such as the bank deposits method, in order to determine the
taxpayer’s taxable income. Estate of Mason v. Commissioner,
supra at 656. Under the bank deposits method, bank deposits are
prima facie evidence of income. Tokarski v. Commissioner, 87
T.C. 74, 77 (1986); Estate of Mason v. Commissioner, supra.
Because petitioner failed to file tax returns and maintain
adequate books and records, respondent used the bank deposits
method to compute petitioner’s taxable income. Specifically,
respondent examined petitioner’s deposit tickets, bank
statements, transcripts from related bank accounts, and canceled
checks. After excluding transfers of funds between accounts and
deposits related to petitioner’s wife’s income and other non-
Schedule-C items, respondent determined that petitioner received
unreported Schedule C taxable income during all years at issue.
Respondent’s determinations are presumed correct, and petitioner
bears the burden of proof.7 Rule 142(a)(1); Welch v. Helvering,
290 U.S. 111, 115 (1933). Petitioner generally contests
respondent’s determinations and asserts that he shared the bank
accounts with his business associates.
Although petitioner and his wife were listed as the sole
account holders, petitioner contends that the bank accounts did
7Respondent’s examination in this case commenced before July
22, 1998, the effective date of sec. 7491. See Internal Revenue
Service Restructuring and Reform Act of 1998, Pub. L. 105-206,
sec. 3001(c), 112 Stat. 727.
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