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understand if the methodology was properly followed or to
specifically verify the amount of income reported by petitioners
for 1993. Those inadequacies are attributable to petitioners'
lack of adequate records that would permit verification. Mrs.
Rifkin testified that customers usually gave a deposit to
petitioners of 60 percent of a proposed job, and that amount was
deposited into the trust account. She further testified that a
customer's deposits were not used for jobs or purposes other than
that customer's job. Mrs. Rifkin went on to explain that as
items were purchased for a client's job, the amounts were taken
from the trust account. She did not explain how the customer’s
deposits were segregated and/or accounted for.
Finally, after completing a job for a customer, if any
amount was left, Mrs. Rifkin testified that the “profit” would be
transferred out of the customer’s trust account to petitioners’
regular business account. The balance of the trust account,
which had $390,804.74 of deposits during the year, was about
$9,000 at the beginning and $6,000 at the end of 1993. We find
it curious that “deposits” in the trust account would shrink to
less than $10,000 at the end of each year when annual activity in
the account approached $400,000. When respondent's counsel asked
Mrs. Rifkin about that apparent incongruity, she did not provide
any explanation other than the account tended to fluctuate.
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