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response to an informal request by the IRS, but only in
response to a discovery order or subpoena.
OPINION
Petitioners are in the real estate business. Although they
filed a joint income tax return for 1989 which reflected
substantial income from their joint endeavors, they filed no
returns for 1990 and 1991, the years in issue. About 3 weeks
before trial they delivered signed joint returns for those
years to respondent's counsel. These documents are stipulated
as part of the record. Petitioners failed to produce any
records, either during the audit process or in preparation for
trial or at trial, on the basis of which respondent or the
Court could reconstruct their income. Consequently respondent
reconstructed petitioners' income by using third party
information and application of the CPI to amounts appearing on
petitioners' 1989 return, as modified pursuant to our opinion
in King v. Commissioner, T.C. Memo. 1994-318.
Although both petitioners participated in the trial of
this case, only Doyle testified. In his testimony he made no
effort to establish the couples' correct taxable income for the
2 years in question. Rather, his testimony consisted mainly of
complaints about repeated IRS audits, which, judging from this
case, were the result of petitioners' own persistent refusal to
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