The Tax Court upheld IRS practice of using bank deposit reconstruction to determine self-employed internet entrepreneur’s unreported income. Bank deposits are prima facie evidence of income. The taxpayer failed to keep adequate records of his business receipts and other income. All bank deposits were considered regular taxable income without regard to their origin where no other evidence was available. In the same case, the Taxpayer failed to keep records of payments to Internet uplink service in the amount of $47,000 which was claimed as an expense. The expense was disallowed. […]
