Srichai and Pusadee Rungrangsi - Page 13

                                       - 13 -                                         

               To summarize, we find that the September 15, 1993, event was           
          not a sale, and therefore we hold that petitioners are not entitled         
          to a loss in connection therewith for either 1993 or 1994.                  
          Issue 2.  Unreported Income for 1992-94                                     
               Having found that petitioners owned Stanton Mexicatessen after         
          September 15, 1993, we proceed to decide the amount of income from          
          the restaurant petitioners should have reported both before and             
          after that date.                                                            
               According to IRS Revenue Agent Julia Chang who conducted               
          petitioners' examination, petitioners were unable to produce any            
          books or records to substantiate the income and expenses for                
          Stanton Mexicatessen for the years in issue, and none were                  
          introduced into evidence at trial.  Revenue Agent Chang testified           
          that because of the large number of cash transactions, a bank               
          deposits analysis was considered inappropriate. Consequently,               
          Revenue Agent Chang reconstructed petitioners' income from the              
          restaurant by analyzing industry standards.  She utilized the RMA           
          Annual Statement Studies 1994 for the relevant time period, which           
          indicated that the industry standard for net profits before tax for         
          restaurants with gross receipts of less than $500,000 was 3 percent         
          of gross receipts.  Therefore, she reconstructed petitioners' net           
          income for the restaurant based on the product of 3 percent of              
          petitioners' reported gross receipts for 1992 and 1993.  For 1994,          

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011