-363-
Payor Or Source Funds Received Characterization
THC $787,129.17 Loan
Computer Placement Service 40,000.00 Loan
TACI Special E Account 190,077.83 Return of investment
TACI Special Account 286,000.00 Loan
Total 1,303,207.00
Transcr. at 4322.
OPINION
A. The Commissioner’s Use of the Bank Deposits Method of Income
Reconstruction
Where a taxpayer fails to maintain or produce adequate books
and records, the Commissioner is authorized under section 446 to
compute the taxpayer’s taxable income by any method which, in the
Commissioner’s opinion, clearly reflects income. Holland v.
United States, 348 U.S. 121, 130-132 (1954); Meneguzzo v.
Commissioner, 43 T.C. 824, 831 (1965); Sutherland v.
Commissioner, 32 T.C. 862 (1959). The Commissioner has great
latitude in selecting a method for reconstructing a taxpayer’s
income, and the method need only be reasonable in the light of
all the surrounding circumstances.
This Court has long accepted the bank deposits method of
income reconstruction. Nicholas v. Commissioner, 70 T.C. 1057,
1065 (1978); Estate of Mason v. Commissioner, 64 T.C. 651, 653
(1975), affd. 566 F.2d 2 (6th Cir. 1977). While not conclusive,
bank deposits are prima facie evidence of income. Boyett v.
Commissioner, 204 F.2d 205 (5th Cir. 1953), affg. a Memorandum
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