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attributable to petitioners’ wages; $132 is attributable to
interest earned; $4,444.97 is attributable to transfers between
petitioners’ savings account and checking account; and $15,760.22
is attributable to employee reimbursements that petitioners
received and deposited into their two bank accounts in 1995.
Petitioners timely filed a Form 1040, U.S. Individual Income
Tax Return, for the 1995 taxable year (1995 return). Petitioners
reported items of income and expenses for both businesses on one
Schedule C, Profit or Loss From Business. In so doing, they
reported $9,996 in gross receipts on Schedule C of their 1995
return.
Upon examination of petitioners’ 1995 return, respondent’s
revenue agent performed a bank deposits analysis and determined
that petitioners had unreported income based upon unexplained
bank deposits. A summary of the revenue agent’s bank deposit
analysis for 1995 reflects the following:
Deposits to bank accounts $103,072.44
Less deposits from known sources 70,994.19
Net deposits 32,078.25
Less gross receipts per return 9,996.00
Total unexplained deposits 22,082.25
During the initial interview with the revenue agent,
petitioner indicated that petitioners did not keep any cash at
home. During a subsequent interview with the revenue agent,
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