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148 (5th Cir. 1983); Webb v. Commissioner, 394 F.2d 366, 371-372
(5th Cir. 1968), affg. T.C. Memo. 1966-81. The reconstruction of
income need only be reasonable in light of all surrounding facts
and circumstances. See Palmer v. Commissioner, 116 F.3d 1309,
1312 (9th Cir. 1997); Giddio v. Commissioner, 54 T.C. 1530, 1533
(1970); Schroeder v. Commissioner, 40 T.C. 30, 33 (1963). The
Commissioner has latitude in determining which method of
reconstruction to apply when taxpayers fail to maintain adequate
records. See Petzoldt v. Commissioner, 92 T.C. 661, 693 (1989).
Once the Commissioner has reconstructed a taxpayer’s income, the
burden is on the taxpayer to demonstrate that the Commissioner’s
determination is excessive. See Mallette Bros. Const. Co., Inc.
v. United States, 695 F.2d at 148; Giddio v. Commissioner, 54
T.C. at 1534.
Our examination of the materials in the record convinces us
that petitioner’s books and records as to diesel fuel sales
contain sufficient inconsistencies with each other and with
petitioner’s tax return as to warrant respondent’s efforts to
reconstruct petitioner’s income from this source. (As to
petitioner’s income from gasoline sales, the mini-mart, and the
coffee shop, see supra A. Preliminary.)
Bedevian, who prepared petitioner’s fiscal 1990 tax return,
told Steve to keep petitioner’s fuel pump computer tapes in a
safe place. Steve did not give these tapes to Bedevian.
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