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after all, a director and officer of CDI. Nevertheless, Mrs.
Carlstedt did not testify as to her involvement with CDI, despite
petitioners' knowledge that that was one of the areas that the
Commissioner was exploring in determining whether petitioner
materially participated in CDI activities. It is well
established that the failure of a party to introduce evidence
within his possession which, if true, would be favorable, gives
rise to the presumption that, if produced, it would be
unfavorable. Wichita Terminal Elevator Co. v. Commissioner, 6
T.C. 1158 (1946), affd. 162 F.2d 513 (10th Cir. 1947).
We are left with petitioner's self-serving testimony that he
did not materially participate in the activities of CDI in 1990
and 1991. The Court is not bound to accept the unverified,
undocumented testimony of taxpayers, and we decline to do so in
the instant case. See Hradesky v. Commissioner, 65 T.C. 87, 90
(1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).
In light of the above, we hold that petitioners have failed
to meet their burden of proving that petitioner was not involved
in the operation of CDI on a basis that was regular, continuous,
and substantial in 1990 and 1991 within the meaning of section
469(h)(1) and section 1.469-5T(a), Temporary Income Tax Regs., 53
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