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During the subsequent examination of petitioner’s 1993 and
1994 returns, petitioner’s income was reconstructed using a bank
deposits and cash expenditures analysis. Through this method it
was determined that ARF had gross sales in 1993 and 1994 of at
least $573,673 and $1,020,504, respectively. These adjustments
resulted in increases of $17,173 for 1993 and $213,892 for 1994
in the income reported by petitioner. Respondent additionally
determined that petitioner failed to include an ending inventory
of $135,415 in calculating his cost of goods sold for 1993 and
received unreported rental income in the amounts of $6,465 and
$4,475, respectively, for the years at issue. With other expense
disallowances and computational adjustments, it was determined
that petitioner underreported his taxable income by $166,681 for
1993 and by $218,285 for 1994.
OPINION
I. Income Tax Deficiencies
Dismissal is governed by Rule 123(b), which provides in
relevant part:
For failure of a petitioner properly to prosecute or to
comply with these Rules or any order of the Court or
for other cause which the Court deems sufficient, the
Court may dismiss a case at any time and enter a
decision against the petitioner. The Court may, for
similar reasons, decide against any party any issue as
to which such party has the burden of proof, and such
decision shall be treated as a dismissal * * *.
The granting of a dismissal under Rule 123(b) lies within the
discretion of the trial court and requires us to balance
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