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PETITIONERS HAVE PROVEN THEY HAVE TAXABLE INCOME FOR
THE YEAR 1993 PREDICATED ON A LOGICAL METHOD OF
COMPUTING SAME, AND SAID METHOD IS SUPERIOR TO AND MORE
TRUSTWORTHY THAN THE METHOD SO USED BY RESPONDENT[2]
* * * * * * *
* * * Taxpayers used a separate bank account which
they designated as a Trust account to hold clients[']
money for purposes of providing future decorating
services, including purchase of furnishings and
contracting out other decorating functions.
The taxpayers drew down on these funds as vendor
invoices were presented. Upon completion of a customer
order or project, funds remaining from a job were
transferred to another account designated as "the
business account." As shown from the record, at the
end of 1993, there was only $5,993.68 remaining in the
Trust account pending disbursement (compared to
$8,553.88 at the beginning of the year). The prior
means that all of the non-disputable $390,804.74 in
deposits were used in payments to vendors and suppliers
with the exception of a mere $69,077 which was
transferred over to the business account.
The Taxpayers followed this procedure with
substantial and reliable consistency, exercising due
2 Petitioners have also urged us to take into account the
settlement figures for the 1992 year in judging the 1993 year.
Because respondent agreed that the 1992 income tax deficiency was
$5,666 and that no sec. 6662(a) penalty is to apply, petitioners
contend that the larger amount and penalty determined by
respondent for 1993 is inherently inconsistent and contrary to
the pattern that petitioners contend exists in their reporting of
income from their business. Petitioners' contentions are
oblivious to many principles of evidentiary, procedural, and
substantive law. For example, under the well-established
principles of Commissioner v. Sunnen, 333 U.S. 591 (1948), each
taxable year or period is not a predicate for another period
unless the principles of res judicata or collateral estoppel have
been shown to apply. Petitioners have not shown that the facts
and circumstances of the 1992 year were decided and are identical
to those of the 1993 tax year. In addition, the details of the
parties’ settlement of the 1992 year, generally, may not be
disclosed to the Court. See Fed. R. Evid. 408.
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