Elizabeth Lai - Page 14

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          Tokarski v. Commissioner, 87 T.C. 74, 77 (1986) (citing Estate of           
          Mason v. Commissioner, supra at 656-657).                                   
               Respondent has introduced adequate evidence to show that               
          petitioner received unreported income during 1999, 2000, and                
          2001.  With regard to respondent’s determinations that resulted             
          from respondent’s bank deposit analyses, respondent is not                  
          required to show a link between petitioner’s bank deposits and a            
          likely taxable source of income.  See, e.g., Tokarski v.                    
          Commissioner, supra; Kudo v. Commissioner, T.C. Memo. 1998-404,             
          affd. 11 Fed. Appx. 864 (9th Cir. 2001).  Respondent’s                      
          determinations regarding the cashier’s check and petitioner’s               
          cash income are founded on statements from third parties such as            
          banks and brokerage firms, and on petitioner’s admissions that              
          she received cash income that she failed to report on her tax               
          returns.  Moreover, petitioner’s nail salon business clearly                
          qualifies as an income-producing activity.  See, e.g., Hamilton             
          v. Commissioner, T.C. Memo. 2004-66 (ownership of interests in              
          businesses sufficient to prove likely source of unreported                  
          income).  Respondent has therefore introduced adequate                      
          substantive evidence to show that petitioner received unreported            
          income in the amounts determined, and, as noted supra, the burden           
          of proof falls on petitioner to demonstrate that respondent’s               
          determinations are arbitrary or erroneous.                                  

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