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deficiency and the gross receipts per the agreement are set forth
below:
Year Notice of Deficiency Agreed Amount
1991 $11,363 $5,000
1992 15,031 6,107
1993 200,457 13,992
1994 574,759 571,259
Total 801,610 596,358
A stipulation of settlement based on the agreement of the
parties was filed on September 11, 2000. The deficiencies,
additions, and penalty agreed to are as follows:
Additions to Tax Penalty
Year Deficiency Sec. 6651(a)(1) Sec. 6654 Sec. 6662(a)
1991 $1,489 $331 --- None
1992 955 --- --- $191
1993 None None --- None
1994 7,753 1,938 None ---
Petitioner argues that respondent was not substantially
justified because respondent used a flawed method of determining
income by treating the redbook as a cash receipts journal instead
of including as income the amounts petitioner actually received.3
Petitioner contends that respondent’s determination resulted in
an overstatement of income. Petitioner further argues that
respondent should have used a bank deposits or net worth method
3 We note that while neither party presented evidence as
to whether petitioner reported income and expenses by the cash or
accrual method, we assume that the method of accounting and
reporting is not in issue in this case.
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