-7-
The admissibility of these facts concerning petitioner's use
of a Bahamian bank account is considered infra pp. 27-32.
Respondent's Reconstruction of Petitioner's Income for 1989-92
Due to the lack of returns and records, respondent
reconstructed petitioner's income for each of the years in issue.
Respondent used the "specific items" method to reconstruct
petitioner's income for 1989-92, in the following manner.
Respondent contacted the payers (i.e., general contractors)
for whom petitioner performed services in 1989-92, to obtain
information about payments made to petitioner (or to petitioner's
sole proprietorship, Down to Earth Plumbing). Respondent
determined petitioner's gross receipts for 1989-92 by adding the
amounts payable on the copies of checks provided by these payers.
Respondent then summonsed petitioner's bank records, to
reconstruct petitioner's expenses for 1989-92. Respondent
treated almost all checks written by petitioner during those
years--other than checks payable to petitioner or to cash--as
having been used to pay deductible business expenses.
Finally, respondent determined petitioner's unreported net
business income for 1989-92 by subtracting allowed expenses from
gross receipts.
Petitioner's gross receipts, allowed business expenses, and
unreported net business income for 1989-92 as so determined by
respondent were:
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