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Petitioners did not produce a receipt for any goods
purchased for E&J Sales. Additionally, the check written on the
Ameritrust account made payable to Raymond was endorsed only by
Raymond and not by any other party. Petitioners failed to bring
a single witness to corroborate Raymond's story. In failing to
do so, petitioners failed to carry their burden of proving that
these funds represent items that should be included in the cost
of goods sold for 1991.
Petitioners claim that the remaining three checks written to
Raymond ($2,600 written on January 7, 1991, $2,000 written on
July 3, 1991, and $1,000 written on October 31, 1991) were to
distribute profits from the sale of the pictures the gain from
which Raymond reported on his return.
On Schedule D of their 1991 return, petitioners reported
gain from two sales of photos. They reported a $5,000 gain from
a July 1, 1991, sale of a photo with zero basis, and a $13,000
gain from a December 4, 1991, sale of photos acquired on December
1, 1991, with zero basis. The checks made payable to Raymond do
not coincide with the sales of the photographs reported on the
1991 return. Furthermore, we have examined the bank records for
the periods around the time of the sales. There is no evidence
that $5,000 was deposited into the account on or around July 1,
1991, or that $13,000 was deposited into the account around
December 4, 1991. Petitioners have not established that the
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