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however, did not finish high school, and Jack attended only 3
weeks of college. Neither has any training in business record
keeping. Respondent has failed to show clearly that petitioners’
unsatisfactory bookkeeping practices were the result of
fraudulent intent.
Respondent also criticizes petitioner’s practice of
submitting a one-page summary of receipts and expenditures to
Jack’s accountant, an old friend from Florida, as a basis for
preparing petitioners’ tax returns. The accountant testified
credibly, however, that after respondent’s examination commenced,
he reviewed certain of petitioners’ records and was able to tie
business expenses reported on petitioners’ returns to invoices
contained in the records. We also have taken into account
testimony of respondent’s agent that the 1993 used-car dealership
records she examined closely substantiated the income reported on
petitioners’ 1993 return and that the construction business
yielded little income. We further note that respondent’s agent
did not examine the records for 1994 and 1995.
Respondent contends that petitioner’s records do not
necessarily reflect off-the-books income that is reflected in the
net worth analysis. Respondent, however, has not demonstrated
any specific instances wherein any such income was omitted or
wherein the records were otherwise falsified. Respondent’s
examining agent testified that she believed the unreported income
indicated by the net worth analysis was attributable to
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