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he testified that petitioner did not embezzle partnership funds.
This we are unprepared to do. Furthermore, while there may be an
appearance of impropriety associated with the facts surrounding
petitioner's control of the cashier's checks, such facts are
consistent with petitioner's and Carlton's agreement that
petitioner manage the financial assets of the partnership.
Accordingly, we find that the cashier's checks remained assets of
the partnership and that petitioners did not receive embezzlement
income resulting from petitioner's purchase and control of them.
Issue 2. Computation of Unreported Income
While the parties agree that petitioners failed to report
various amounts of income received from Fruitland during the
taxable years at issue, they remain in disagreement with respect
to the amount of unreported income. Petitioners contend that the
amount of unreported income for each taxable year at issue is
equal to the amount of personal living expenses petitioner paid
by drawing checks against Fruitland's checking account during the
taxable year, plus one-half of the cashier's checks purchased by
petitioner during the taxable year, less one-half of the amount
of cashier's checks negotiated during the taxable year, less the
amount of income reported as received from Fruitland on
petitioners' tax return.
Relying on the theory that petitioner purchased the
cashier's checks with embezzled funds, respondent contends that
the amount of unreported income for each taxable year at issue is
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