Charles Y. and Jin Y. Choi - Page 18




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         unlikely.  We also note that Gene’s did not receive a check-                 
         cashing fee if cash was returned in connection with the purchase             
         of groceries.  On the basis of the record, this assumption is, at            
         best, highly speculative.                                                    
              Mr. Schindele also assumed that the cash from these check               
         purchases described above was “used to cash payroll checks or for            
         cash purchases of inventory”.  In that way, Mr. Schindele                    
         attempted to neutralize the possibility of income reposing in                
         customers’ cashed checks.  Here again such assumptions are purely            
         speculative and unverified.  We note that the lack of records to             
         support such assumptions was of petitioner’s own making and was              
         intended to conceal the true amount of reportable income.                    
              Because petitioner did not account for Gene’s inventory,                
         either at the beginning or at the end of a taxable year, and                 
         inadequate records were kept of cash purchases, it is not                    
         possible to determine Gene’s cost of goods sold--the base on                 
         which Mr. Schindele employed the percentage markup method.                   
              Mr. Schindele’s report was also flawed in connection with               
         the amount of the percentage markup used.  In that regard, his               
         trial testimony conflicted with his written report.  The report              
         contains the statement that Mr. Schindele determined the                     
         percentage markup through interviews of petitioners and of “some             
         of the vendors of Gene’s Market.”  Mr. Schindele later testified             
         that he did not interview any of Gene’s vendors to establish the             






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