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later. In all likelihood, the Note would only have been retained
as a record of the bonding transaction. Yet, if the Note had
been retained as such, it is only reasonable to suppose that
other more important records of that transaction would also have
been retained, and it seems unlikely that these other records
would have been overlooked when the Note was discovered in
preparation for this litigation. We find further reason for
skepticism in Mr. Cunniff’s testimony that he did not consult Mr.
Petar regarding the existence of other documents relating to the
bonding transaction. Assuming that the Note was in fact prepared
to satisfy bonding requirements, any such documents would
obviously have been useful to refresh their recollection of the
bonding transaction and surely they would have discussed any such
documents in preparation for trial.
Third, the witnesses’ account of the Note is difficult to
reconcile with their conduct during the audit. If the Note is
genuine, then the only explanation for the failure of Messrs.
Cunniff and Mr. Petar to call its existence to the attention of
the revenue agent during the audit is, as Mr. Cunniff testified,
that they did not at that time realize the significance of the
Note in relation to the deductibility of the bonus. Although the
reading material they received from the revenue agent should have
alerted them to the Note’s significance, it is conceivable that
they did not read it carefully. However, if they did not become
aware of the significance of the Note for tax purposes until
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