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Contrary to this assertion, however, the Schedule C, Profit or
Loss From Business, attached to petitioners’ 1995 income tax
return indicates that their used car business was on an accrual
basis of accounting. Moreover, petitioners’ accountant explained
that petitioners’ accounting method was not, in fact, a cash
method but rather “a kind of a hybrid”. From the accountant’s
testimony, it appears that for all years in issue, petitioners
effectively reported income on an accrual basis, maintaining
accounts receivable. Such receivables properly represent assets
in a net worth analysis of a taxpayer who uses an accrual method
of accounting. Cf. United States v. Vardine, 305 F.2d 60, 64 (2d
Cir. 1962).
Petitioners contend that the accounts receivable figures
used in respondent’s net worth analysis are incorrect.
Petitioners have failed, however, to offer credible evidence as
to what the correct amount of their accounts receivable should
be. In light of Jack’s testimony that he discarded any documents
regarding accounts receivable once they were paid off, the dearth
of evidence is unsurprising. Jack testified in conclusory
fashion that petitioners’ net accounts receivable for 1993, 1994,
and 1995 were $100,578, $77,999, and $47,880, respectively. Jack
testified, without further explication, that these most recent
figures “were taken directly from the sales contracts.”
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