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to their Schedule C business income. Petitioners have the burden
of proving that such adjustments are erroneous. Welch v.
Helvering, 290 U.S. 111, 115 (1933). All section references are
to Internal Revenue Code in effect for 1992, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
During 1992, petitioners owned and operated three newsstands. On
Schedule C of their 1992 Federal income tax return, petitioners
reported cost of goods sold of $403,350 and gross receipts of
$445,000. During the audit, petitioners attempted to
substantiate these items with altered and incomplete records.
Because the records were patently unreliable, respondent used a
combination of methods (i.e., percentage markup, unit and volume,
and specific items methods of proof) to reconstruct petitioners'
income. We conclude that respondent's methods were reasonable.
On Schedule C of their return, petitioners reported $40,250
of expenses, of which respondent disallowed the following:
$3,500 in bad debts, $8,500 for repairs and maintenance, $3,600
for meals and entertainment, $9,000 for utilities, and $8,500 for
wages. With respect to wages, petitioners established that they
paid $180 per week for 40 weeks in 1992. Therefore, they are
entitled to a deduction of $7,200. Petitioners failed to offer
any evidence that supports, or any reasonable evidentiary basis
for the Court to estimate, any of the remaining expenses.
Respondent determined an accuracy-related penalty pursuant
to section 6662. The accuracy-related penalty applies to any
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