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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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