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petitioner’s reported itemized deductions, personal exemptions,
self-employment tax, and child tax credit.
For all 3 years at issue, respondent conducted a bank
deposit analysis to determine the total deposits in petitioner’s
business and personal bank accounts. Respondent excluded
deposits that, in his determination, represented nontaxable
sources, including transfers between petitioner’s accounts.
Respondent determined that the remaining amount was taxable
income.
Respondent added $9,760 of income to petitioner’s reported
adjusted gross income for each year. According to respondent,
this figure represented the amount of petitioner’s annual cash
expenditures for personal expenses based on the form petitioner
filled out at her meeting with Agent Cedergreen on September 23,
2002. Because petitioner withdrew nearly zero cash from her
personal and business accounts during 1999, 2000, and 2001,4
respondent determined that the $9,760 represented additional
income.
For 2000, respondent determined $55,204 of additional
income. That amount reflects petitioner’s cash purchase of the
cashier’s check discussed supra. Because petitioner did not
withdraw cash from any of her bank accounts to provide the funds
4 Petitioner wrote one check to cash in 1999 in the amount
of $3,500. Respondent accordingly reduced his deficiency
determination by that amount for 1999.
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Last modified: November 10, 2007