- 6 -
1989. Respondent's additional gross receipts computation was
based, in part, on documents (i.e., customer contracts and
illegible checks), which were not probative evidence that V&V
received income. As a result, respondent's computation
overstated V&V's gross receipts by $30,561 for 1988 and $12,121
for 1989. Accordingly, we hold that Messrs. Vazzana and Valenza
underreported V&V's gross receipts by $121,289 for 1988 and
$101,029 for 1989.
II. V&V Expenses
Petitioners contend that V&V made substantial cash
expenditures to subcontractors for which they did not claim
deductions. Specifically, they contend that V&V paid J. B.
Johnson, a handyman, $40,000 in 1988 and $36,000 in 1989.
Petitioners have failed, however, to provide any documentation to
establish that V&V paid Mr. Johnson such funds. Mr. Johnson's
testimony was contradictory and unpersuasive. He first stated
that he had received the income and reported it on his tax
returns. He later stated that he did not report the income, had
no records of receiving such income, and may not have received
the amounts petitioners contend V&V paid him.
Petitioners contend that V&V paid Frank Schmitt, a
carpenter, $9,320 in 1988 and $11,960 in 1989. Mr. Schmitt
testified that he received these amounts and reported them as
income on his Federal income tax returns. Petitioners provided
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