Bill McDonald - Page 16

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          party records from banks and clients in order to reconstruct                
               Under these circumstances, Pease was able to specifically              
          determine the identity of some clients and a range of the fees              
          charged.  Where the amount of a client’s fee was not available,             
          Pease used the minimum fee.  In instances where it was possible             
          to discern that specific income had been reported on Gold’s                 
          return (the corporate return), Pease eliminated that amount from            
          his reconstruction of the partnership return.  Where the                    
          corporate income, if any, could not be discerned or verified,               
          Pease, in order to protect the Government’s interest, attributed            
          the income to the M&M partnership.  In those instances, there may           
          have been duplication between the income reported for Gold and              
          the income determined for petitioners through M&M.  With respect            
          to one of those instances, respondent conceded on brief that the            
          amount of partnership income determined for 1989 should be                  
          reduced by $4,938 for the deposits in Gold’s Merchants Bank                 
          account during the last 5 months of 1989.                                   
               Courts have approved methods of reconstruction which project           
          or extrapolate from a limited amount of information.  See, e.g.,            
          Gerardo v. Commissioner, 552 F.2d 549 (3d Cir. 1977), affg. in              
          part and revg. in part T.C. Memo. 1975-341; Adamson v.                      
          Commissioner, supra.  In Adamson v. Commissioner, supra at 548,             
          the court stated as follows:                                                
                    Where the government has introduced evidence                      
               linking the taxpayer to the illegal activity, the                      
               taxpayer should not be allowed to avoid paying taxes                   

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