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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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