The Tax Court allowed the IRS use of the bank deposit method to reconstruct the petitioner’s income, and noted that during the years at issue the taxpayer reported adjusted gross income of $58,000 while repaying 15 vehicle loans for $173,250 and $180,600 on real property loans. The petitioner lacked adequate records and the IRS reconstructed his income from bank deposit records, including checks for work the body shop did that were deposited directly in an account to pay the loans on the petitioner’s various vehicles. He also told the auditor that he owned no rental properties and understated the number of vehicles that he owned. His itemized deductions included home mortgage interest of $11,950 and taxable income of $114. On his 2011 return he reported a net profit from business of $28,799. Upon audit, the petitioner claimed that he had only one business account and that his only source of income was from the body shop.
He also owned numerous rental properties, and had loans on them as well as loans on various vehicles.
The petitioner operated an autobody shop as his primary income source. IRS Reconstructed Income From Bank Records. This page contains summaries of significant recent court opinions and IRS developments involving taxation, with a particular focus on tax issues that could impact agricultural producers, agricultural businesses and rural landowners.
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