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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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