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ending balance of advances by shareholders of $24,482 and
$36,741, and $36,741 and $117,604, respectively. Petitioner
submitted checks showing payments of $40,250 to Newark Wreckers.
Most of these checks were written well before the sale
transaction and according to Mr. Viviano would have been repaid.
Two of the checks, however, were written on February 21 and March
16, 1990, for $2,500 and $5,000, respectively. Considering Mr.
Viviano’s testimony that the companies repaid shareholder
advances within a few months of borrowing, we find it reasonable
that Newark Wreckers owed petitioner $7,500 at the time of the
sale. Thus, we find that respondent’s determination of
petitioner’s income from this sale should evidence that in 1990,
petitioner was still owed $7,500 from Newark Wreckers. However,
we do not, in light of trial testimony, find it reasonable that
Newark Wreckers owed petitioner the balance, $32,750.
(b). Petitioner’s Income Reconstructed From Bank
Deposits
Bank deposits constitute prima facie evidence of income.
Tokarski v. Commissioner, 87 T.C. 74, 77 (1986). This method of
determining a taxpayer’s income assumes that all the money
deposited into a taxpayer’s bank accounts during a specific
period constitutes taxable income. Price v. United States, 335
F.2d 671, 677 (5th Cir. 1964). Of course, “the Government must
take into account any non-taxable source or deductible expense of
which it has knowledge.” Id. Furthermore, “The fact that the
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