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to support a finding that any part of the activity in question
was that of L.V. Properties, Inc., or that Omnitec Nevada was
engaged in any business activity. The Court, therefore, sustains
respondent’s determination that the trade or business activity
was that of petitioner Omnitec Missouri.
The second issue is whether respondent properly determined
the income of petitioner, Omnitec Missouri, using the bank
deposits analysis method, the results of which are outlined
above.
The bank deposits analysis method is an accepted method of
income determination where books and records are either not
maintained by a taxpayer, or where the taxpayer refuses to
produce books and records.
Taxpayers are required under section 6001 to keep such
records as may be required to sufficiently establish gross
income. Anson v. Commissioner, 328 F.2d 703, 705 (10th Cir.
1964), affg. Bassett v. Commissioner, T.C. Memo. 1963-10. If a
taxpayer either fails to keep the required records, or if the
records do not clearly reflect income, the Commissioner is
authorized under section 446(b) to reconstruct income by a method
which clearly reflects income. Anson v. Commissioner, supra;
Sutherland v. Commissioner, 32 T.C. 862 (1959). The bank
deposits method is an acceptable method of reconstructing income
and may be used to establish the correct amount of income.
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