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B. Unidentified Deposits
The question whether the unidentified deposits to the First
Bank account are income to SCC merits further discussion. The
record reflects deposits were made to account No. 893315300 in
addition to the amounts traced to specific home sales.
Respondent conceded that two of these deposits were loans from
Mr. Strong’s parents but asserts that the rest of these deposits
were income to SCC and Mr. Strong.
Many of the deposits in dispute were of currency or were
completely unidentified. Other deposits were by check
purportedly from various individuals or entities. Respondent
asserts that Mr. Strong used nominee names to hide his own
identity on some of the deposited cashier’s checks, such as the
three checks from Mr. Jeanotte in 1990 and two checks from his
brother, Sean Strong, in 1994.
Because of Mr. Strong’s inadequate records, respondent
reasons under the bank deposits method of proof that these
deposits are construction receipts absent evidence of any
nontaxable source of the deposits. Respondent cites DiLeo v.
Commissioner, 96 T.C. 858, 867 (1991), affd. 959 F.2d 16 (2d Cir.
1992); Clayton v. Commissioner, 102 T.C. 632 (1994); Tokarski v.
Commissioner, 87 T.C. 74 (1986); and Nicholas v. Commissioner, 70
T.C. 1057 (1978). We agree with respondent that unless
petitioners have shown that the funds came from nontaxable
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