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A. Preliminary Matters
Before addressing the merits of each claimed deduction, the
Court notes that respondent does not dispute that petitioner’s
records were destroyed by petitioner’s accountant’s wife and does
not contend that the destroyed records were inadequate or
insufficient. Additionally, the record establishes that
petitioner fully cooperated with the IRS from the audit level
through the trial stage. Furthermore, having observed
petitioner’s appearance and demeanor at trial, we find him to be
honest, forthright, and credible.
B. Labor Expense
As an initial matter, we note that respondent disallowed
$32,155 of labor expenses for 1994 in excess of the amount
petitioner claimed on his return. Respondent never explained
this disparity. To this extent, respondent’s determination is
not sustained.
Petitioner testified that he and his crew worked every week
during the years in issue. Although we found petitioner to be a
credible witness, we think it is likely that there were some
weekdays during the years in issue that he did not work. We
note, however, that we found as a fact that occasionally he and
his crew worked weekends. On the basis of the record, we
approximate that petitioner and his crew worked 40 hours a week,
50 weeks a year. On the basis of this finding, we conclude that
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