Manuel and Margaret Karcho - Page 17

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          amounts recorded on those records from the sale of food and                 
          miscellaneous items understated income by substantial amounts.              
          Also, in connection with his guilty plea for attempted income tax           
          evasion for 1987, Mr. Karcho admitted, in reference to the Daily            
          Income/Cash Receipts records, that such records were false, and             
          petitioners have stipulated that similar records were provided to           
          their accountant for each year in issue for purposes of preparing           
          Banner’s income tax returns.  Finally, petitioners argue on brief           
          that although the Daily Income/Cash Receipts records did not                
          record all of Banner’s gross receipts, they are nevertheless                
          substantially accurate as to Banner’s net income because they               
          also did not record numerous expenses that were paid with                   
          unrecorded cash.  As for the other set of records (the Meter                
          Readings Sheets and the Reconciliation Sheets that tie in to                
          them), petitioners attempt to dismiss them as entirely                      
          fictitious.  In these circumstances, respondent is entitled to              
          reconstruct petitioners’ income by any reasonable means.  See               
          Giddio v. Commissioner, supra; Harbin v. Commissioner, supra, and           
          cases cited therein.  On the basis of this record, we believe               
          respondent’s use of the Meter Readings Sheets to reconstruct                
          petitioners’ income is reasonable.                                          
               Petitioners mount various assaults on respondent’s use of              
          the Meter Readings Sheets in an attempt to show error in the                
          income reconstruction.  First, as noted, Mr. Karcho testified               

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