Bill McDonald - Page 19

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          petitioners’ attack on the judgmental aspects of respondent’s               
          reconstruction are dependent on information that petitioners                
          knowingly and intentionally discarded.5                                     
               We must emphasize that petitioners have not performed a                
          reconstruction of their corporate, partnership, or individual               
          income by which we could test the accuracy of respondent’s                  
          method.  Petitioners have provided only their self-serving                  
          testimony, which is both uncorroborated and contradictory to the            
          record in this case.  Accordingly, we hold that the                         
          reconstruction is appropriate, as modified through the                      
          concessions made by respondent.                                             
               Division of Partnership Income--Respondent contends that the           
          reconstructed partnership income should be split equally by                 
          Maynard and McDonald.  Petitioners have, by designation as                  
          “guaranteed payments”, divided M&M’s $24,590 of reported income             
          $3,457 to McDonald and $21,133 to Maynard.  That division equals            
          approximately 14 percent for McDonald and 86 percent for Maynard.           
          Through 1989, petitioners did not have a written partnership                

               5 Petitioners also argued that the doctrine of judicial                
          estoppel should be applied in this case to preclude respondent              
          from making the alternative determination that income from the              
          tax accounting practice could, in some instances, be attributed             
          to Gold and M&M.  That doctrine is inappropriate in this setting.           
          Because of petitioners’ lack of adequate records, respondent has            
          taken alternative positions with respect to income that                     
          petitioners could not verify or show belonged to either the                 
          corporation or the partnership.  Respondent is permitted to take            
          such positions, and it is petitioners’ obligation to show which             
          of the entities, if any, is obligated to report the income.  The            
          mere reporting of the income on the corporate return does not               
          enable petitioners to meet their burden.                                    

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