Donald P. and Margie C. Osborne - Page 4

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          determinations.2  There is no credible evidence to substantiate             
          deductions (i.e., those relating to depreciation, insurance,                
          interest, supplies, tax and licenses, travel, and other expenses)           
          beyond those that respondent allowed in the notice of deficiency.           
          In addition, we sustain respondent’s determinations relating to             
          cost of goods sold.  During the trial, pursuant to a stipulated             
          agreement, the parties reduced the amount of unreported gross               
          income in dispute.                                                          
               To determine petitioners’ unreported income, respondent                
          conducted a bank deposits analysis.  Bank deposits are prima                
          facie evidence of income, Tokarski v. Commissioner, 87 T.C. 74,             
          77 (1986), and under the bank deposits method, all money                    
          deposited into a taxpayer’s bank account during a given period is           
          assumed to be taxable income, DiLeo v. Commissioner, 96 T.C. 858,           
          868 (1991), affd. 959 F.2d 16 (2d Cir. 1992).  Respondent’s                 
          determinations are presumed to be correct, and petitioners bear             
          the burden of proving that respondent’s bank deposits analysis is           
          erroneous.  See Rule 142(a); Parks v. Commissioner, 94 T.C. 654,            
          658 (1990).  Petitioners did not submit sufficient evidence to              

               2  Pursuant to sec. 7491(a), petitioners have the burden of            
          proof unless they introduce credible evidence relating to the               
          issue that would shift the burden to respondent.  See Rule                  
          142(a).  Our conclusions, however, are based on a preponderance             
          of the evidence, and thus the allocation of the burden of proof             
          is immaterial.  See Martin Ice Cream Co. v. Commissioner, 110               
          T.C. 189, 210 n.16 (1998).                                                  

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