David W. Hill - Page 15

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               A.   Normally on -- not on any given time.  He would just              
                    come over and pay me, and say, This is what I owe you.            
                    And I said, Fine.                                                 
               Q.   And you would just say, That's fine.                              
               A.   That's correct.                                                   

               Petitioner's explanation for his failure to report, or even            
          to estimate, the income received from Mr. Hall on his 1989, 1990,           
          and 1991 returns was both inconsistent and implausible.  See                
          Factor v. Commissioner, 281 F.2d 100, 129 (9th Cir. 1960), affg.            
          T.C. Memo. 1958-94.  Petitioner contends that he did not report             
          the income he received from Mr. Hall because Mr. Hall failed to             
          issue Forms 1099 to him for the years in issue and petitioner had           
          no way of estimating the amount of the payments.7  Petitioner's             
          testimony explaining why he did not estimate the amount of these            
          payments on his tax returns is less than clear:                             

               Q.   Was it possible to determine how much you received,               
                    based on deposits to bank accounts or other                       
                    documentation?                                                    
               A.   Not based on that because there were some expenses                
                    involved.                                                         
               Q.   Explain that to us, if you would.  How were the                   
                    expenses entered into this?                                       
               A.   Well, there was equipment that was purchased, vehicles            
                    that were purchased, et cetera.                                   

               7Citing Harper v. Commissioner, 54 T.C. 1121, 1141 (1970),             
          petitioner argues that the nonreceipt of a Form 1099 is a                   
          mitigating factor in cases where, as here, the taxpayer reports             
          all of his other income.  However, that case is distinguishable             
          on its facts and does not support petitioner's argument.                    




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