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2. Petitioner’s Adjustments to Unreported Income
Determined by Bank Deposits
In attacking respondent’s income reconstruction, generally,
petitioner argues that he is entitled to adjustments for
unclaimed deductions of expenses and unreimbursed loans/advances
with respect to his various business activities.33 He contends
that these unclaimed adjustments substantially offset the income
that respondent reconstructed.
(a) Petitioner’s Alleged Loans/Advances
Petitioner argues that one of the primary adjustments to the
amount of reconstructed income is unreimbursed loans/advances
that he made to Alviso and GMT.34
Petitioner alleges that when he deposited insurance refund
checks payable to Alviso and GMT into his personal bank accounts,
he transferred portions of those refunds back to those
corporations. While this is true, as far as it goes, petitioner
33“[I]t is well settled– ‘that evidence of unexplained
receipts shifts to the taxpayer the burden of coming forward with
evidence as to the amount of offsetting expenses, if any.’”
Franklin v. Commissioner, T.C. Memo. 1993-184 (quoting Siravo v.
United States, 377 F.2d 469, 473 (1st Cir. 1967)).
34However, it appears he was reimbursed for many of these
alleged loans. For example, compare petitioner’s check No. 1086
from Bank of Milpitas, account No. 512-001-200593, dated Dec. 19,
1989, for $999 made payable to “DMV” and GMT’s check No. 3895
dated Dec. 27, 1989, for $1,000 made payable to petitioner which
states on the memo line “Reimburse for DMV fees”. Furthermore,
petitioner’s bookkeeper testified that petitioner’s businesses
customarily repaid such loans. Additionally, petitioner
testified that some of the checks he offered were not loans but
represented his personal expenses.
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