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extent the financials indicate that one or both of the entities
operated at a loss, a loss is not necessarily equivalent to the
absence of taxable activities. Moreover, although the 1992
report contains a note stating that the sole proprietorship was
inactive in 1992, no similar statement was included in the 1993
report and even the 1992 remark is entitled to little weight here
because of the difficulty in reconciling that assertion with
other evidence in the record and because of the inherent nature
of annual reports.
With regard to evidentiary discrepancies, petitioners’ own
return for 1992 reflects a net profit for the proprietorship of
$3,237 in that year, thus obfuscating any potential correlation
between claimed inactivity for financial business purposes and
the receipt of taxable income. Additionally, and further calling
into question claims that any inactivity which might have existed
in 1992 continued throughout 1993, the record contains a copy of
a check for $160,000 dated April 21, 1993, and issued to “LE
BOUEF COMPANY” by “The CIT Group/Equipment Financing, Inc.” The
parties stipulated that this check represented “a loan made to
LeBouef Company sole proprietorship for the purpose of purchasing
construction equipment.” Again, equipment purchases seem
difficult to square with claims of inactivity.
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