David W. Hill - Page 13

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          an owner of several rental properties.  With the exception of the           
          unreported cash payments from Mr. Hall, petitioner maintained               
          records for all his endeavors.  During the years in issue,                  
          petitioner issued 39 Forms 1099 to various subcontractors in the            
          conduct of his consulting business.  Petitioner documented each             
          and every payment made to these individuals throughout the 3-year           
          period.  In addition, petitioner supplied his return preparer,              
          Mr. Pressley, with receipts and documentation for all expenses              
          stated on his Federal income tax returns.  Petitioner's                     
          recordkeeping included retention of documentation for a $3.26               
          expense.  Petitioner was obviously aware of his obligation to               
          maintain adequate records of his income and expenses.  His                  
          failure to maintain any record of the substantial cash payments             
          received from Mr. Hall was inconsistent with his normal practice.           
          This pattern of omission was not a good faith or negligent error.           
          See Kendrick v. Commissioner, T.C. Memo. 1980-270.                          
               Petitioner testified that he was expecting Mr. Hall to                 
          supply him with Forms 1099 reflecting his income and, thus, did             
          not maintain records of receipts from Mr. Hall.  But this                   
          explanation cannot account for petitioner's failure to keep                 
          records after 1989, when it was surely apparent that Mr. Hall was           
          not going to give petitioner timely Forms 1099.  Nevertheless,              
          petitioner continued his practice of maintaining no records of              
          income from Mr. Hall.                                                       

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