- 33 -
which suggests that such amount is not includable in
Beaufort Leaf's gross income in 1991. In passing, we
note that petitioners do not claim that such amount is a
deductible expense in 1991.
Second, we do not credit the testimony of each
petitioner suggesting that he did not know of or approve
Beaufort Leaf's participation in the scheme. Both
petitioners owned or had a financial interest in tobacco
warehouses and were actively engaged in the tobacco
business. They are knowledgeable and sophisticated members
of the relatively small community of persons who engage in
that business. We do not believe that Mr. Roberts'
activities in furtherance of the scheme that petitioners
describe as widespread, could have escaped the attention
of both petitioners. Indeed, we note that some of the
unreported sales were made at the warehouses in which
petitioners had an interest. Furthermore, we do not
accept the testimony of each petitioner that he agreed
to finance the operation of Beaufort Leaf by cosigning a
note for $300,000 and he took no action to supervise those
operations by reviewing the partnership's Forms MQ-79 or
taking any other action.
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