-5-
the analysis includes, as an application of funds, amounts that
do not reflect expenditures made by the taxpayer during the year.
Chandler v. Commissioner, T.C. Memo. 1996-51.
In the instant case, respondent used the Bureau of Labor
Statistics as a proxy for petitioner's application of funds
(i.e., expenditures). We have previously approved this type of
use when reconstructing a taxpayer's income. See Giddio v.
Commissioner, supra at 1533.
Petitioner essentially contends that the self-employment
income reported on the information returns represents the total
gross receipts of Fred Thomas Tile Service during the years in
issue. Petitioner contends that after paying all business
expenses (including paying Lorenzo Thomas for his labor), his
business either broke even or lost money, and, therefore, he had
no "income" during the years in issue. In the absence of any
evidence to corroborate this claim, we are unpersuaded.
Petitioner testified that he maintained records of all
business transactions, yet he did not provide any books or
records of the business during respondent's audit or before this
Court. Petitioner indicated that all business receipts were
deposited into and all business expenses were paid from a
business checking account, yet he did not submit the bank
statements into evidence. Petitioner did not submit into
evidence any check stubs, canceled checks, or Forms W-2
indicating the amount of wages paid to Lorenzo Thomas. With no
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