-36-
4. Petitioner did not produce any business or accounting
records for respondent to examine, with respect to 1993 or 1994.
Under these circumstances, we find that respondent's
reconstruction of petitioner's income by reference to the BLS
information was reasonable. It is uncontested that petitioner
received unreported business gross receipts and interest in 1993
and 1994, in amounts substantially in excess of the unreported
income determined by respondent for those years using the BLS
method. Also, petitioner's petition admitted that petitioner
owed tax for 1993 and 1994. Therefore, there is ample evidence
that petitioner had taxable income in 1993-94, other than the
purely circumstantial proof provided by the cost of living data.
It is also clear that respondent lacked the information necessary
to ascertain the amount of that income.
B. Petitioner's Asserted Deductions for 1993-94
Petitioner asserts that he paid substantial business
expenses in 1993-94, and that his taxable income for each of
those years was therefore less than the income determined by
respondent using the BLS method. We find that petitioner is not
entitled to any reduction in the amount of taxable income
determined by respondent for 1993 or 1994, for two reasons.
First, the BLS method used by respondent is based on petitioner's
assumed cost of living; it is therefore an estimate of
petitioner's net business income, and has already taken business
deductions into account. Second, as noted above, petitioner
received business gross receipts and interest in 1993 and 1994,
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