Daniel R. Leavell and Eva Lovene Leavell - Page 4

                                                 - 4 -                                                    
                   During the audit by respondent's representatives of                                    
            petitioners' Federal income tax returns for 1985, 1986, and 1987,                             
            petitioners did not cooperate with respondent's representatives.                              
            In spite of requests therefor, petitioners did not make available                             
            to respondent's representatives any meaningful books and records                              
            or other credible documentation regarding the various items that                              
            were examined.  As a result of petitioners' failure to cooperate,                             
            respondent's audit adjustments and deficiency determinations at                               
            issue in this case were made on the basis of limited information                              
            and in some instances estimates.  Respondent's deficiency                                     
            determinations against petitioners for 1985, 1986, and 1987 were                              
            not arbitrary and capricious, and such deficiency determinations                              
            are entitled to the usual presumption of correctness.  Welch v.                               
            Helvering, 290 U.S. 111, 115 (1933); Gatlin v. Commissioner, 754                              
            F.2d 921, 923 (11th Cir. 1985, affg. per curiam T.C. Memo.                                    
            1982-489); Mendelson v. Commissioner, 305 F.2d 519, 522 (7th Cir.                             
            1962), affg. T.C. Memo. 1961-319.                                                             
                   After granting petitioners' request for a continuance, this                            
            case was tried at a special trial session beginning on                                        
            January 10, 1994.   At trial, petitioners submitted no credible                               
            and little understandable evidence relating to the adjustments at                             
            issue.  Petitioners were unprepared.  They offered incomplete and                             
            disorganized documentation.  Many documents that were admitted at                             
            trial were objected to by respondent's counsel because the                                    
            documents had not been exchanged with respondent's counsel prior                              




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