Charles Y. and Jin Y. Choi - Page 17




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         reconstruction was attributable to check cashing and not to the              
         sale of merchandise.                                                         
              Petitioners called Patrick Schindele as an expert witness to            
         provide a report and to testify in support of their argument.                
         Mr. Schindele’s report contained a reconstruction of Gene’s gross            
         receipts using the percentage markup method.  His approach,                  
         however, was flawed in several respects.  Because of petitioners’            
         inadequate records, Mr. Schindele’s report, in large part, is                
         based on assumptions.  Many critical assumptions were based on               
         information provided by petitioners and not developed by Mr.                 
         Schindele’s independent analysis.                                            
              Mr. Schindele had to make numerous assumptions in order to              
         reconstruct the amount that he believed represented Gene’s gross             
         receipts.  The amounts used, however, could not be supported or              
         verified.  He also assumed that only a small portion of                      
         customers’ checks was for the purchase of merchandise.                       
         Conversely, he assumed that either most checks were cashed at                
         face value or that nominal amounts of grocery purchases were                 
         involved in the transactions.  Because of petitioners’ lack of               
         records, the register tapes in particular, there is no way to                
         know whether Mr. Schindele’s assumption is correct.                          
              We find Mr. Schindele’s assumption that the majority of                 
         customers who paid by check bought only nominal amounts of                   
         groceries and merely went to Gene’s for cash to be highly                    






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