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their return for each such year.
With respect to the Schedule C car and truck expenses, for
each of the years at issue, petitioners provided their return
preparer with the amount of business miles that they claimed they
had driven during each such year, and that return preparer used
the standard mileage rate to determine the amount of the deduc-
tion for such expenses that petitioners claimed in Schedule C of
their return for each such year.
In Schedule E for 1993, 1994, and 1995, petitioners reported
rental income from the Toledo rental property of $4,000, $5,318,
and $7,397, respectively, and rental expenses from that property
of $6,668, $6,330, and $10,239, respectively.
In the notice, respondent used an indirect method, the so-
called source and applications of funds method, in order to
determine whether petitioners had unreported Schedule C gross
receipts for any of the years at issue. That was because peti-
tioners had not maintained adequate records for any of those
years. Respondent derived all of the amounts that respondent
used in applying the source and application of funds method with
respect to each of the years at issue from one or more of the
following sources: Petitioners’ joint return for each such year,
petitioners’ bank statements for each such year, petitioners’
monthly listings for each such year, and petitioners’ oral
statements made to respondent’s revenue agent who conducted the
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