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678 (5th Cir. 1964); DiLeo v. Commissioner, 96 T.C. 858, 871
(1991), affd. 959 F.2d 16 (2d Cir. 1992).
According to respondent’s bank deposits analysis,
petitioners had unreported income of $12,764 for 1998 and $2,735
for 1999. Petitioners concede that they had unreported income of
$2,735 for 1999, and they do not generally dispute respondent’s
use of the bank deposits method to reconstruct their income for
1998 and 1999. Petitioners contend, however, that they
overreported the gross revenue of petitioner’s law practice for
1998 by $3,036 ($572,284 deposited less nontaxable deposits of
$71,771 = $500,513; $503,549 originally reported less $500,513 =
$3,036) because, in addition to $55,971 of nontaxable deposits
allowed by respondent, they had the following nontaxable sources
of income in 1998:
Two checks from Edgar payable to petitioner
(#5472, 5475) $1,800
Check from Pershing Royal Alliance retirement account
payable to Edgar and endorsed to petitioner $7,500
Check payable to Drew Graham from Mrs. Graham
and deposited in petitioners’ account $3,250
Check payable to Allison Graham from Mrs. Graham
and deposited in petitioners’ account $3,250
Petitioners’ total claimed additional
nontaxable sources for 1998 $15,800
We conclude that respondent did not subtract all nontaxable
sources of deposits to petitioners’ account. Specifically, we
conclude that the two $3,250 checks written by Mrs. Graham to
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