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petitioners note that respondent accepted as correct most of the
information that petitioners provided and that maintenance of the
records that petitioners did not provide (e.g., cash register
receipts) is not required. The fact that petitioners' own
accountants had to resort to estimates and reconstruction methods
to prepare the original and amended returns, however, belies
petitioners' contention. It is well settled that taxpayers have
a duty to maintain records that enable them to file correct
returns, DiLeo v. Commissioner, 96 T.C. 858, 867 (1991), affd.
959 F.2d 16 (2d Cir. 1992); sec. 1.446-1(a)(4), Income Tax Regs.,
and that in the absence of such records respondent has the
authority to reconstruct a taxpayer's income, Petzoldt v.
Commissioner, 92 T.C. 661, 686-687 (1989). Petitioners' records
for National Distributors were nonexistent, and their records for
Guns & Goodies were, at best, scant. In addition, they routinely
disposed of important source documents such as cash register
tapes and sales slips. Cf. Kikalos v. Commissioner, T.C. Memo.
1998-92 (finding that failure to maintain source documents,
particularly cash register tapes, justified respondent's use of
an indirect method of reconstruction); Edgmon v. Commissioner,
T.C. Memo. 1993-486 (finding that the absence of source documents
such as cash register tapes and sales slips amounted to
inadequate records). Therefore, we reject petitioners'
contentions.
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