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relating to labor costs for this business. Petitioners’
calculation thus appears to reflect a duplicate deduction for
labor costs.
Petitioners also claim that the estimated gross receipts of
$855,500 that petitioners reported on the 1985 Schedule C
relating to this business were overreported. In support of
their claim, petitioners offer a document that Daniel submitted
to the Illinois Department of Revenue that indicates 1985 sales
of $611,544 from this business. That document, however, only
purports to reflect income from equipment sales of this
business. It does not reflect service income, and it reflects
sales for only 6 months of 1985.
On audit, due to lack of substantiation, respondent
disallowed the claimed $711,055 cost-of-goods sold for 1985
relating to this business. In their opening posttrial brief,
petitioners appear to concede that the claimed $200,810 loss
relating to Daniel's sales and service business is not
allowable.
As already mentioned, where a taxpayer fails to maintain
adequate records regarding a business, respondent is entitled
to adopt any reasonable method to determine income. Bradford
v. Commissioner, 796 F.2d 303 (9th Cir. 1986), affg. T.C. Memo.
1984-601. We sustain respondent’s adjustment on this issue.
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