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percent of the fee and for Wealth Preservation received only 80
percent of the fee.
The second flaw is respondent’s assumption that everyone who
purchased into Wealth Preservation and phase I, II, and III,
other than the witnesses who testified at trial, paid these full
amounts. Several witnesses credibly testified that they
themselves and others they recruited into The Ultimate Comeback
did not pay the amounts listed in the orientation guide. Some
paid a slightly reduced amount, some paid cost, others paid
nothing at all, and many did not pay an administration fee. We
conclude that respondent’s application of the unit and volume
method does not clearly reflect petitioners’ income; therefore,
we shall not adopt the figures determined by respondent under
this method. See sec. 446(b); Holland v. United States, 348 U.S.
121 (1954); Webb v. Commissioner, supra at 371-372.
B. Net Worth Method
An alternative method respondent employed on brief to
reconstruct petitioners’ income from the multilevel marketing
business was the net worth method. This method of proof is an
established method accepted by the courts. See Holland v. United
States, supra.
Under the net worth method, the taxpayers’ opening net worth
for the taxable year is established. Increases in net worth are
added to the opening net worth. Nondeductible expenditures
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