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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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