Dennis C. Gandy - Page 50

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          “coyotes” who transported the laborers from Mexico, and                     
          unsubstantiated trucking expenses, they are undermined by                   
          evidence that payments to “coyotes” and trucking expenses for               
          which no receipts were obtained were recouped by deductions from            
          wages paid to the employees.  Finally, the amounts claimed are              
          simply not credible.  Petitioners seek to increase the deductions           
          for labor costs by nearly doubling them for 1985 (adding $346,172           
          to $356,607.96 claimed on the original return) and adding an                
          additional two-thirds of the amount claimed for 1986 (adding                
          $325,229 to $482,581.18 claimed on the return).  We are not                 
          persuaded that they had that much cash available, after diverting           
          cash to their loan business and other personal uses, unless they            
          had substantial amounts of unreported cash income as well.                  
              Nonetheless, in view of the nature of petitioners’ business            
          during the years in issue and their use of imported labor and               
          payments of those laborers in cash, it is likely that some                  
          expenses that would be deductible were paid in cash.  Under these           
          circumstances, we must weigh heavily against petitioners, whose             
          inexactitude is of their own making.  We also bear in mind that             
          petitioners had some cash sales in undetermined amounts during              
          the years in issue that were not included in respondent’s                   
          computation of unreported income.  Cohan v. Commissioner, 39 F.2d           
          540 (2d Cir. 1930).  However, the Court must have some basis on             
          which an estimate may be made.  Williams v. United States, 245              





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