- 18 -
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
credibility.
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,
Page: Previous 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 NextLast modified: May 25, 2011