- 14 -
and on his return". Sec. 1.446-(1)(a)(4), Income Tax Regs. In
this case, Nick alone controlled and prepared the books. He did
not retain copies of the cash register tapes or other sales
receipts, which were the only records that would substantiate the
amount of petitioners' gross income. Schwarzkopf v.
Commissioner, 246 F.2d 731, 734 (3d Cir. 1957), affg. in part and
remanding T.C. Memo. 1956-155.2
Petitioners argue that their bookkeeping practices
accurately reflected their income. They urge that respondent's
methods of reconstructing that income have misstated the actual
amounts. Petitioners have overlooked the fact that their failure
to retain the necessary records, particularly the cash register
"Z tapes", precluded respondent from determining exactly what
petitioners' income was for the years in issue. In these
circumstances, respondent is not required to make an exact
determination. All taxpayers, including petitioners here, who
fail to maintain the records necessary to substantiate their
assertions on their Federal income tax returns assume the risk
that they may have to pay a tax based upon income that is not
determined with certainty. That is the fault of the taxpayers,
2 See also Edgmon v. Commissioner, T.C. Memo. 1993-486
(failure to retain register tapes, "Z-tapes" and bills); Votsis
v. Commissioner, T.C. Memo. 1988-70 (failure to retain register
tapes and sales receipts); Catalanotto v. Commissioner, T.C.
Memo. 1984-215 (failure to retain register tapes and sales
receipts).
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