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trial. Petitioner refused to answer the sole question asked on
cross-examination, asserting his Fifth Amendment privilege
against self-incrimination.
Respondent called several witnesses who established that,
during the years at issue, petitioner received substantial
commissions from various insurance companies. Respondent
introduced bank records to establish the total amounts that
petitioner had deposited in his bank accounts. Respondent called
Revenue Agent Glenn Dugger, who was not involved in the original
examination of petitioner’s income, to testify how petitioner’s
income was reconstructed using the bank deposits method.3
Revenue Agent Dugger had reviewed the original bank deposits
analysis and concluded that, giving petitioner the benefit of the
doubt, more of the deposits should have been treated as nonincome
transfers between accounts. He deducted those deposits from the
total deposit amount. Revenue Agent Dugger calculated
petitioner’s insurance business expenses at 54.77 percent of his
commissions on the basis of the Department of Labor statistics
for insurance agents. Revenue Agent Dugger calculated
petitioner’s insurance commissions and expenses for the years at
issue to be as follows:
3The examination officer who originally conducted the bank
deposits analysis had retired on disability following a stroke
and was unavailable to testify at the trial in this case.
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