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that record that petitioners have a deficiency in tax for each of
the years 1992, 1993, and 1994 attributable to (1) petitioners'
unreported income that we have found for each of those years and
7 (...continued)
that restaurant was generating as much as approximately $420,000
of gross receipts annually. That amount is well in excess of the
gross receipts of $289,648, $308,643, $334,427, and $307,478 for
1991, 1992, 1993, and 1994, respectively, that Paul & Joe, Inc.,
reported in Forms 1120S for those years.
In an attempt to show that Spring Hill restaurant could not
have been the source of the bank deposits at issue, petitioners
proffered the testimony of Theodore R. Mandigo (Mr. Mandigo) whom
the Court found qualified as an expert in the restaurant busi-
ness. Petitioners' expert acknowledged during his testimony that
he based his opinion that Spring Hill restaurant could not have
been the source of those deposits on data provided to him by
petitioners. For example, petitioners' expert witness assumed
that Paul & Joe, Inc., had gross receipts of $306,000, $334,000,
and $307,000 during 1992, 1993, and 1994, respectively, which
were approximately the amounts that Paul & Joe, Inc., reported as
gross receipts in Forms 1120S for those years. Those amounts of
gross receipts are belied by Mr. Mamo's testimony that during
1991 Spring Hill restaurant generated gross receipts of as much
as approximately $420,000 and by the credit applications that Mr.
Mifsud and petitioners, respectively, submitted during 1993.
Petitioners' expert witness also assumed that the amounts of cost
of goods sold of Spring Hill restaurant for the years at issue
that petitioners provided to him were accurate. However, the
parties stipulated that the cost of goods sold of Paul & Joe,
Inc., was understated for 1993 and 1994 in the amounts of $14,515
and $11,946, respectively, because, for some unexplained reason,
Paul & Joe, Inc., did not claim all of its expenses. Mr. Mandigo
conceded that if the data which petitioners provided to him and
on which his opinion was based were incorrect, his opinion would
change. We conclude that petitioners' expert witness has not
rebutted the evidence in the record establishing that Spring Hill
restaurant was capable of producing the bank deposits at issue.
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