John S. Gibson, f.k.a. John S. Mactavish - Page 5




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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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