Ernest L. and Kathleen Newsome - Page 13

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            respondent's method of calculating petitioner's gross receipts                             
            may not be perfect, it is certainly reasonable under the                                   
            circumstances.  As the Court of Appeals for the Fifth Circuit                              
            observed in Webb v. Commissioner, 394 F.2d 366, 373 (5th                                   
            Cir.1968), affg. T.C. Memo. 1966-81:                                                       
                        Arithmetic precision was originally and                                        
                  exclusively in * * * [the taxpayer's] hands, and he had                              
                  a statutory duty to provide it.  He did not have to add                              
                  or subtract; rather, he had simply to keep papers and                                
                  data for others to mathematicize.  Having defaulted in                               
                  his duty, he cannot frustrate * * * [respondent's]                                   
                  reasonable attempts by compelling investigation and                                  
                  recomputation under every means of income                                            
                  determination. * * *                                                                 
                  In this case, it is obvious that the amounts reported by                             
            petitioners for gross receipts and cost of goods sold on the                               
            Schedules C were substantially understated.  Had petitioners                               
            produced any books and records, we have no doubt that little                               
            support would have been provided for the amounts reported on                               
            petitioners' Federal income tax returns.  It is also obvious that                          
            a significant portion of petitioner's newspaper delivery service                           
            business was conducted in cash.  We believe that the gross                                 
            receipts petitioners reported on the Schedules C failed to take                            
            into account considerable amounts of cash payments that                                    
            petitioner collected from his customers.                                                   

            satisfied that had respondent taken into account petitioners'                              
            other concerns, such as the extra newspapers, the fact that 75 of                          
            petitioner's customers subscribed to the combination plan, and                             
            the fact that 5 of petitioner's customers subscribed to the                                
            weekday only subscription plan, only de minimis changes to her                             
            estimates would have resulted.                                                             

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