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notations of the purposes for some of these checks.
Respondent argues that petitioners have not met their
burden of proving that these checks do not constitute
income because they did not introduce any receipts or
other evidence to show how the proceeds were spent. Thus,
respondent maintains that we must sustain her determination
that the proceeds of these checks constitute income to
petitioners.
Considering all of the facts and circumstances, we
find that these additional checks payable to cash do not
constitute income to petitioners. Ms. MacKall testified
that petitioner often withdrew cash from H&B's First
Interstate account to obtain funds necessary for H&B's
daily operations. Although H&B's record keeping was, to
say the least, informal and sloppy, we are nonetheless
convinced that the proceeds of these checks were used to
pay actual expenses incurred on H&B's behalf and were
not converted to petitioner's personal use. Ms. MacKall
provided summaries of the checks in question and testified
as to how the proceeds were spent. We find Ms. MacKall's
testimony credible in this regard and find that the
proceeds of these checks do not constitute taxable income
to petitioners.
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