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Respondent increased American Valmar’s gross income for the years
in issue by the excess of the American Valmar deposits received
during a year over purchases made and commissions earned during
such year: $1,426,653, $1,507,440, and $32,335, for 1991, 1992,
and 1993, respectively (the excess amounts).
We have found that American Valmar had four customers during
the years in issue: Video Computer, Diapazon, Interrosa, and
Kond Petroleum (the customers). Petitioners claim that the
customers were the source of the American Valmar deposits and
that, until expended on behalf of one of the customers or earned
as a commission by American Valmar, the American Valmar deposits
belonged to the customers. Petitioners rely principally on the
testimony of Markovski that American Valmar had liabilities to
the customers for the unexpended balance of the American Valmar
deposits. Although petitioners did produce some correspondence
with three of the customers, petitioners produced no written
agreements with any of them. In its financial records, American
Valmar did credit the American Valmar deposits to contracts
payable. Video Computer is identified on some of the wire
transfers, but none of the other customers are. No
representative of any of the customers testified.
Petitioners explain their lack of documentary substantiation
by explaining that it was the normal business practice for
business entities located in the former Soviet Union to deposit
funds with foreign businesses without documentary evidence.
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