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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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