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care to see that the obligations of a project were
fully paid off before the taxpayers could claim and
transfer any funds to gross revenue. Predicated on
same, this Trust account principle should be respected
and, as only an opening premise, the $69,077 should
become the opening universe for purposes of gross
revenue. * * *
Petitioners, therefore, argue that they used a methodology
where customers’ advances and/or payments were placed in a trust
or customers’ bank account and that the amounts transferred from
the trust account to another business-denominated account
represented the net income or profit from the customer
transactions after paying petitioners' suppliers or
subcontractors. Petitioners offered a certified public
accountant who, after respondent's audit and issuance of the
notice of deficiency, observed the records and methodology for
1992 and concluded that it was a workable approach to reporting
income. Petitioners' accountant/witness, however, did not audit
or verify petitioners' methodology for 1993 or show how
petitioners' records would have systemic integrity.
More significantly, the records of petitioners' business
were prepared by Mr. Rifkin, who was deceased as of the time of
trial, and Mrs. Rifkin was not familiar with the record
methodology or the return preparation. She testified that she
signed the tax return without reviewing its contents.
Accordingly, we are left with petitioners' accountant/witness'
conclusion that the system used could work, but no way to
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