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income for the years at issue by analyzing petitioner’s bank
deposits during those years (the bank deposits analyses). The
resulting bank deposits analyses, dated December 11, 1997,
purport to list total monthly deposits, subtract “non-taxable
deposits”, and reduce the resulting adjustment by the amount of
Schedule C gross income reported on petitioner’s return for each
of the years at issue. The bank deposits analyses developed
proposed adjustments to petitioner’s Schedule C income,
enumerated below, that were dramatically lower than the proposed
adjustments to petitioner’s Schedule C income contained in the
notices of deficiency:
Proposed adjustment
Year Notice of deficiency Deposit method
1987 $77,811 $45,767
1988 117,819 7,113
1989 116,483 47,232
1990 154,069 13,785
Immediately before trial, the parties submitted a first
supplemental stipulation of facts in which respondent conceded
the 1988 and 1990 proposed adjustments for unreported income in
their entirety,7 revised the proposed 1987 and 1989 adjustments
7Respondent’s counsel acknowledged at trial that concerns
about a possible shift of the burden of proof to respondent
“certainly came into play when we decided to concede” the 1988
and 1990 unreported income adjustments. In fact, respondent’s
counsel candidly explained the concessions as follows: “We felt
that given the size of the discrepancy and the fact that, if the
burden of proof were shifted, * * * we likely would not carry
it.”
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