Timothy A. Runels and Emma Valdivieso Runels, et al. - Page 7




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          Commissioner, supra at 686-687.  Indirect methods may be used for           
          this purpose.  Holland v. United States, 348 U.S. 121 (1954).               
          The Commissioner’s reconstruction need only be reasonable in                
          light of all the surrounding facts and circumstances.  Petzoldt             
          v. Commissioner, supra at 687; Giddio v. Commissioner, 54 T.C.              
          1530, 1533 (1970).                                                          
               The evidence shows that petitioners failed to provide                  
          adequate records to account for the gross receipts from their               
          pallet sales.  Therefore, it was reasonable for the TCO to use              
          indirect methods, i.e., the bank deposits method for 2002 and a             
          “cash T” analysis for 2003, to reconstruct petitioners’ gross               
          receipts.                                                                   
               2002                                                                   
               Bank deposits constitute prima facie evidence of income.               
          Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).  The bank                  
          deposits method of determining income assumes that all the money            
          deposited into a taxpayer’s bank accounts during a specific                 
          period constitutes income taxable to the taxpayer.  Price v.                
          United States, 335 F.2d 671, 677 (5th Cir. 1964).  The                      
          Commissioner, however, must take into account any nontaxable                
          source or deductible expense of which he has knowledge.  Id.                
          The method employed is not invalidated even if the calculations             
          of the Commissioner are not completely correct.  DiLeo v.                   








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