Case: Tax Court Allowed Adjustments to IRS Bank Deposits Analysis (IRC §446)

The U.S. Tax Court held that the taxpayer underreported its income for 2015 and 2016, allowing some adjustments to the IRS’s bank deposits analysis. The taxpayer, a hospice care company, failed to keep adequate books and records that clearly reflected its income on an accrual basis. The IRS used a bank deposits analysis to reconstruct the taxpayer’s income and found that the taxpayer had understated its income for 2015 and 2016 tax years. The taxpayer petitioned the Tax Court for review. Upon review, the Court found that: 1) the IRS’s use of a bank deposit was appropriate because the taxpayer ...