-28-
a. Petitioners' 1983 Income From the Tokyo Saunas
The following chart shows the amount of petitioners' income
from Tokyo Saunas as implied (1) from respondent's determination
that petitioners had $140,000 cash on hand on December 31, 1982,
and (2) from our conclusion that they had $279,000 cash on hand
on that date:
Income from Saunas
1983 1984 1985 1986 1987
Reported by
petitioners $43,501 $37,269 $95,595 $22,625 $1,169
Unreported income
from saunas
if petitioners 221,961 45,598 8,608 69,788 29,872
had $140,000 in
cash on Dec. 31,
1982
Total $265,462 $82,867 $104,203 $92,413 $31,041
Sauna income if
petitioners had
$279,000 $126,462 $82,867 $104,203 $92,413 $31,041
in cash on Dec.
31, 1982
b. Petitioners' Large Cash Purchases Early in 1983
Hughes concluded that petitioners had cash on hand on
December 31, 1982, of $140,000 based on the fact that petitioners
spent $45,002 in January 1983 and $100,000 in April 1983. He
also concluded that the Tokyo Saunas did not produce that much
income for petitioners in the first 4 months of 1983. We think
that analysis is correct, except as discussed next. We believe
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