Bill McDonald - Page 18

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          instances, the corporation or partnership had earned or received            
          fees.  As a result of the failure to maintain adequate records,             
          petitioners’ testimony is uncorroborated and rendered less                  
          credible.  Although petitioners pointed out situations where they           
          contended that no fee or a lesser fee was charged, when asked               
          whether Pease understated any fees, petitioners’ recollection               
          failed them.                                                                
               Moreover, Pease was not able to secure the names of all of             
          petitioners' clients.  Petitioners were either unable or                    
          unwilling to disclose the identity of clients missed or not                 
          located by Pease.  Finally, petitioners were evasive and vague              
          when confronted by the Court with inconsistencies in their                  
          testimony or evidence.  Considering all these circumstances, we             
          find petitioners’ testimony to be uncorroborated and without                
               Petitioners also argue that some of their clients may have             
          failed to pay for services performed.  In those instances,                  
          petitioners argue that M&M, which is on the cash method of                  
          accounting, should not include those amounts for the 1989 year.             
          Petitioners’ argument has several fatal weaknesses.  Initially,             
          petitioners have no proof (because they discarded the billing and           
          receivable records) of who actually paid and who did not.  It was           
          the absence of those records that forced respondent to                      
          reconstruct petitioners’ income for 1989.  A reconstruction                 
          method is not a direct method of accounting, but an indirect                
          method which can, to some extent, be based on judgment.  Again,             

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