Jerry L. Crabtree - Page 36

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                  As to the second badge of fraud asserted by                         
             respondent, that petitioners maintained inadequate records,              
             we note that respondent has advanced this argument only                  
             with respect to the records of Crabtree Investments.                     
             Respondent has not introduced any evidence that petitioners              
             Jerry and Eddie Crabtree themselves maintained inadequate                
             records.  As to the records of Crabtree Investments, we                  
             cannot review their adequacy or inadequacy because all of                
             the records, except for the general ledgers, were destroyed              
             by fire.  Therefore, we have no independent means from                   
             which to evaluate the revenue agent’s conclusion that the                
             records were inadequate.                                                 
                  As to the third badge of fraud, respondent argues that              
             it is “patently unreasonable, particularly considering the               
             [cash] nature of his business” for the bar to earn income                
             “which just happened to equal the amount of checks received              
             for days upon end.”  Petitioners claim that, during the                  
             years in issue, some large manufacturing companies in the                
             area were renovating their plants and employed a number of               
             out-of-town workers.  Petitioners testified that Justins                 
             provided check-cashing services to these people to entice                
             them to spend their money at Justins.                                    
                  Partly on the basis of the testimony of their                       
             accountant, petitioners maintain that from time to time                  

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Last modified: May 25, 2011