William E. and Karen L. Kivett - Page 6

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          company as a result of an automobile accident, and approximately            
          $14,500 she received from her mother.  Thus, petitioner argues,             
          these cash sources account for the moneys respondent contends               
          were contributions of the participants in the gifting club.                 
               The bank records, exemplified in respondent’s bank deposits            
          analysis, do not support petitioner’s argument.  With respect to            
          the moneys that petitioner claims she received, those moneys are            
          credited in respondent’s analysis as nontaxable receipts.                   
          Respondent’s analysis further shows numerous deposits throughout            
          the year from individuals in amounts of $500, $1,000, $1,500, and           
          $2,000, thus lending credence that these deposits were intended             
          for the gifting club.                                                       
               In Clayton v. Commissioner, 102 T.C. 632, 645-646 (1994),              
          this Court held:                                                            

                    The use of the bank deposits method for computing                 
               unreported income has long been sanctioned by the courts.              
               DiLeo v. Commissioner, 96 T.C. 858, 867 (1991), affd. 959              
               F.2d 16 (2d Cir. 1992).  When a taxpayer keeps no books or             
               records and has large bank deposits, the Commissioner is not           
               arbitrary or capricious in resorting to the bank deposits              
               method of computing income.  Id.                                       
                    Bank deposits are prima facie evidence of income,                 
               Tokarski v. Commissioner, 87 T.C. 74, 77 (1986), and the               
               taxpayer has the burden of showing that the determination is           
               incorrect, Estate of Mason v. Commissioner, 64 T.C. 651, 657           
               (1975), affd. 566 F.2d 2 (6th Cir. 1977).  In such case the            
               Commissioner is not required to show a likely source of                
               income, id., although here she has done so.  The bank                  
               deposits method assumes that all money deposited in a                  
               taxpayer’s bank account during a given period constitutes              
               taxable income, but the Government must take into account              






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