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Inadequate books and records were maintained relating to
funds received by the Stores for the rental of videos and
relating to the partnership’s and to petitioners’ income from the
Stores. Most of the records that allegedly were maintained were
retained only for a short period of time and were not introduced
into evidence. No records appear to have been maintained
relating to checks and credit card payments received for rental
of the videos.
Petitioners presented no receipts, invoices, photographs, or
other credible evidence to establish and verify petitioner’s
ownership and sale of, and tax basis in, personal videos that
would explain the nature and source of the bank deposits in
question.
Petitioners have failed to establish the nontaxable nature
of the bank deposits treated by respondent as unexplained and as
taxable income. We sustain respondent’s adjustments to the
partnership's and to petitioner's income based on the unexplained
bank deposits.
Reimbursements for Leasehold Improvements
On March 20, 1989, the partnership leased from MC-Peoria
Limited Partnership (Peoria) a portion of a building for Store 5.
Under terms of the lease, the partnership was obligated to make
certain capital improvements to the building, and Peoria was
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