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petitioner's 1990 gross income. Because the reconstructed income
was sufficiently similar to the income that petitioner had
reported on his 1990 Schedule C, the IRS decided not to pursue an
audit of petitioner's 1990 Federal tax return. As a result of
the audit, respondent sent a statutory notice of deficiency to
petitioner for 1988 and 1989 on April 9, 1993.
OPINION
Respondent argues that petitioner understated his income
from Stardust in 1988 and 1989. Respondent contends that
petitioner maintained inadequate books and records and that the
calendars are the most accurate reflection of petitioner's
income. Respondent also argues that petitioner underpaid his
taxes for both years due to fraud and, accordingly, that section
6501(c)(1) permits assessment at any time.
Petitioner asserts that his records accurately reflect
income. On brief, petitioner states that he placed the X marks
on the calendars not to count income but to "tell if the dancers
were stealing customers, determine how effective telephones were
being handled, and gauge the potential profits to be made if the
business were being handled correctly". Petitioner further
asserts that respondent has not satisfied her burden of proving
fraud either for penalty purposes or for statute of limitations
purposes.
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