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income of a taxpayer who has kept no books and records and who
has large bank deposits. Clayton v. Commissioner, supra at 645;
DiLeo v. Commissioner, supra at 867. Bank deposits are prima
facie evidence of income. Tokarski v. Commissioner, 87 T.C. 74,
77 (1986). The bank deposits method assumes that all money
deposited into a taxpayer’s bank account during a particular
period constitutes taxable income. Clayton v. Commissioner,
supra at 645. The Commissioner must take into account, however,
any known nontaxable source or deductible expense. Id.
We reiterate that the Commissioner’s determinations are
generally presumed correct, and the taxpayer bears the burden of
proving that these determinations are erroneous. Rule 142(a);
Welch v. Helvering, 290 U.S. at 115. Respondent’s agent used
third-party procedures to obtain information about funds
deposited into Mrs. Paterson’s personal bank accounts and
subtracted from these funds the amounts of income Mrs. Paterson
reported on her returns for the years at issue. Mrs. Paterson
reported a mere $5,947 in 1997 and $1,511 in 1998, while
respondent determined she had unreported income from the cash
deposits of $160,637.41 in 1997 and $61,832.42 in 1998.
Petitioners make two primary arguments why respondent’s
determinations regarding Mrs. Paterson’s unreported income are
erroneous.
First, petitioners argue that the bank deposits method
double counts income that Mr. Paterson reported on his returns.
Petitioners have introduced no evidence to support this argument,
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