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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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Last modified: March 27, 2008