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1992, and 1993. In those returns, petitioners reported gross
receipts and net profit of NDV and total gross income, as fol-
lows:
Gross Receipts Net Profit
Year of NDV of NDV Total Gross Income
1990 $372,332 $25,647 $22,626
1991 365,611 21,076 18,861
1992 396,801 38,694 42,614
1993 439,578 65,425 65,425
Petitioners' Expenditures and Other Relevant
Admissions During the Years at Issue
In a residential loan application signed by petitioners
during December 1987, petitioners indicated that their monthly
gross income was $5,000. Petitioners' monthly mortgage payment
after securing that loan was $887.27.
In an application for casualty insurance for NDV that Mr.
Katerelos signed and that is dated April 8, 1988, he stated that
NDV had annual sales of $360,000.
During 1987, petitioners made $29,000 of improvements to the
residence that they had purchased in 1986. A list of those
improvements appeared in NDV's gross receipts journal for 1987 at
the time in 1990 that that journal was provided to Mr. Phielix
during respondent's examination of petitioners' returns for 1987
through 1989. One week after he returned that journal to peti-
tioners and confronted them with the list of improvements, Mr.
Phielix reviewed the journal again and noticed that that list was
missing. Mr. Katerelos had torn that list out of the gross
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